Question

(a) Larkspur Co. sold $2,120,000 of 12%, 10-year bonds at 102 on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on July 1 and January 1. If Larkspur 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.)

Interest expense to be recorded

$

(b) Cullumber Inc. issued $660,000 of 8%, 10-year bonds on June 30, 2017, for $508,594. This price provided a yield of 12% on the bonds. Interest is payable semiannually on December 31 and June 30. If Cullumber 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.)

Interest expense to be recorded

$

Answer 1