On January 1, 2014, Vigeland Corporation issued $2,600,000 in bonds that mature
ID: 2493915 • Letter: O
Question
On January 1, 2014, Vigeland Corporation issued $2,600,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 12 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 10 percent. The company uses the straight-line amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Required: 1. What was the issue price on January 1, 2014? 2. What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? 3. What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? 4. What is the book value of the bonds on (a) June 30, 2014? and (b) December 31, 2014?
Explanation / Answer
On January 1, 2014, Vigeland Corporation issued $2,600,000 in bonds that mature
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