On November 1, 2017, Archangel Services issued $313,000 of eight-year bonds with

Question

On November 1, 2017, Archangel Services issued $313,000 of eight-year bonds with a stated rate of 12% at par Interest payments occur each April 30 and October 31. On December 31, 2017. Archangel made an adjusting entry to accrue interest at year-end What is the amount of interest expense that will be recorded on December 31, 2017? $37,560 $6,260 $18,780 $783 39. On January 1, 2017. Citywide Sales issued $25,000 in bonds for $29,800 These ate eight year bonds with a staled rate of 15% and pay semiannual interest Citywide Sales uses the straight-line method to amortize the bond premium. On Juno 30. 2017, when Citywide makes the first payment to bondholders, what is the amount that will be reported as interest expense? $1,575 $1,875 $3,225 $1,225 40. On July 1 2017 Adams Company has bonds with balances as shown below If the company retires the bonds for $74 150 what will be the effect on the income statement? Gain on retirement of $6 950 1 Loss on retirement of $6 950 Gain on retirement of $650 Loss on retirement of $650

Explanation / Answer

38) Interest made accrued on Dec 31, 2017 = 313000 * 12% * 2/12 = $6260

39) Answer: $1575

=> Semi annual interest = 25000 * 15% /2 = $1875 less amortisation [ total premium $4800 / number of interest periods (8 * 2 = 16) = $300] = Amount of interest expense recorded $1575

40) Answer: Gain on retirement of $650

this is because Total received at the time of issue of bond = $74800 - The retirement amount of Bonds $74150 = $650

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