(a) Monty Co. sold $2,030,000 of 10%, 10-year bonds at 105 on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on July 1 and January 1. If Monty uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2017, and December 31, 2017. (Round answer to 0 decimal places, e.g. 38,548.)
1) What is the interest expense to be recorded?
(b) Flounder Inc. issued $660,000 of 8%,
10-year bonds on June 30, 2017, for $577,750. This price provided a
yield of 10% on the bonds. Interest is payable semiannually on
December 31 and June 30. If Flounder uses the effective-interest
method, determine the amount of interest expense to record if
financial statements are issued on October 31, 2017.
(Round intermediate calculations to 6 decimal places,
e.g. 1.251247 and final answer to 0 decimal places, e.g.
38,548.)
2) What is the interest expense to be recorded?
a) | Bonds issue price | (2,030,000*1.05)= | 2131500 | ||||
Bonds face value | 2,030,000 | ||||||
Bonds premium | 101,500 | ||||||
Amortization of premium = | 101,500/20 | ||||||
5075 | |||||||
interest expense to be reported on july and December | |||||||
interest paid (2,030,000*5%)= | 101500 | ||||||
less:premium on bonds payable amortized | 5,075 | ||||||
interest expense to be reported on july and December | 96,425 | answer | |||||
b) | interest expense to be recorded on Oct 31,2017 | ||||||
interest expense = | 577,750*10%*4/12 | ||||||
19258 | answer | ||||||
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