Hello, I would need help with the below: Akron Corporation, whose annual account

Question

Hello, I would need help with the below:

Akron Corporation, whose annual accounting period ends on December 31, issued the following bonds:

Date of bonds: January 1, 2014

Maturity amount and date: $125,000 due in 10 years

Interest: 10 percent per annum payable each June 30 and December 31

Date sold: January 1, 2014

Straight-line amortization is used.

Provide the following amounts to be reported on the December 31, 2014, financial statements:: at par, at 98 and at 109 for the below:

Interest expense

Bonds payable

Unamortized premium or discount

Net liability

Stated rate of interest Cash interest paid

Explanation / Answer

Bonds issued at at par 98 109 Interest expense = ($125000 x 10%) 12500 12500 12500 Bonds payable $125000 $125000 $125000 Unamortized premium or discount 0 500 2250 Net liability $125000 123000 134000 Stated rate of interest Cash interest paid 10% 10% 10% Total Premium /Discount $2500 $11250 134000 $125000+($11250-$2250) 123000 $125000-($2500-$500) 2500 $125000-($125000/100*98) Per year $2500/5 year = $500 $11250 $125000-($125000/100*109) Per year $11250/5 year = $2250

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