Question

Stinson Corporation issued $540,000 of 7 %, 10-year bonds payable on March 31, 2019. The market interest rate at the date of issuance was 10% , and the bonds pay interest semiannually. Stinson Corporation's year-end is March 31. Review the following amortization table for Stinson's bonds: (Click the icon to view the amortization table.) Read the requirements. 1. How much cash did Stinson Corporation borrow on March 31, 2019? How much cash will the company pay back at maturity on March 31, 2029? on March 31, 2019 Stinson borrowed cash in the amount of $ at maturity on March 31, 2029 Stinson will pay back cash in the amount of $ Reference 2. How much cash interest will the company pay each six months? Stinson will pay cash interest each six months. Bond Carrying Amount Semiannual Interest Interest Discount Discount 3. How much interest expense will Stinson Corporation report on September 30, 2019, and on March 31, 2020? Why does the amount of interest expense increase each period? Interest Date Payment Expense Amortization Balance 100,944 S $ 439,056 Mar 31, 2019 of interest expense on September 30, 2019 Stinson will report S 18,900 $ Sep 30, 2019 S 21,953 S 3,053 97,891 442,109 Stinson will report $ of interest expense on March 31, 2020. 445,314 Mar 31, 2020 18,900 22,105 3,205 94,686 18,900 22,266 3,366 91,320 448,680 Sep 30, 2020 Why does the amount of interest expense increase each period? Interest expense increases because the as the bonds move toward maturity. Print Done bond carrying amount decreases bond carrying amount increases discount account balance increases

Answer 1

1. Borrowed = 439,056

Payback amount = 540,000

2. Cash interest paid each 6 months = 18,900

3. Interest expense on Sept. 30, 2019 = 21,953

Interest expense on Mar. 31, 2020 = 22,105

Interest expense increases because the bond carrying amount increases as the bonds move towards maturity.