Stafford Co. Issued $200,000 face value, 6%, 10-year bonds on January 1, 2017 for $172,740. The...

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Stafford Co. Issued $200,000 face value, 6%, 10-year bonds on January 1, 2017 for $172,740. The market rate of interest was 8

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Answer 1

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Answer #1

(a) Interest expense = $172740 x 8% x 1/2 = $6909.60

(b) Carrying value of bonds on December 31, 2017: $174595.58

(c) Interest expense recorded on 2017 Income Statement = $6909.60 + $6945.98 = $13855.58

(d) Decreased

Working:

Date	Cash Paid	Interest Expense	Discount Amortization	Bond Carrying Value
Jan.1, 2017			27260	172740
Jun. 30, 2017	6000	6909.60	-909.60	173649.60
Dec. 31, 2017	6000	6945.98	-945.98	174595.58

Amounts have been rounded off to 2 decimal places in the absence of specific instructions regarding the same. Kindly round off as required.

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Answer 2

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