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28 Sep 2019
P10-2 Reporting Bonds Issued at Par LO 10-2 On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent. (If necessary, use the appropriate factor(s) from the tables provided.) ( FV of $1 PV of $1 FVA of $1 PVA of $1 ) Required: 1 What was the issue price on January 1, 2014? Issue price 2 What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? June 30, 2014 December 31, 2014 Interest expense $20,000 3 What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? June 30, 2014 December 31, 2014 Cash paid 4 What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015? December 31, 2014 December 31, 2015 Bonds payable
| P10-2 Reporting Bonds Issued at Par LO 10-2 | |||||||||
| On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate | |||||||||
| of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent. | |||||||||
| (If necessary, use the appropriate factor(s) from the tables provided.) ( | FV of $1 | PV of $1 | FVA of $1 | PVA of $1 | ) | ||||
| Required: | |||||||||
| 1 | What was the issue price on January 1, 2014? | ||||||||
| Issue price | |||||||||
| 2 | What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? | ||||||||
| June 30, 2014 | December 31, 2014 | ||||||||
| Interest expense | $20,000 | ||||||||
| 3 | What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? | ||||||||
| June 30, 2014 | December 31, 2014 | ||||||||
| Cash paid | |||||||||
| 4 | What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015? | ||||||||
| December 31, 2014 | December 31, 2015 | ||||||||
| Bonds payable | |||||||||
Collen VonLv2
29 Sep 2019
Related questions
Super Splash issues $850,000, 8% bonds on january 1,2018, that mature in 10 years. The market interest rate for bonds of similar risk and maturity is 7%, and the bonds issue for $910,403. Interest is paid semianually on June 30 and December 31.
1. Complete the first three rows of an amortization schedule.
| Date | Cash Paid | Interest Expense | Decrease in Carrying Value | CarryingValue |
| 01/01/18 | $910,403.00 | |||
| 06/30/18 | ||||
| 12/31/18 |
