(a) Riverbed Co. sold $1,870,000 of 10%, 10-year bonds at 104 on January 1, 2017
ID: 2525210 • Letter: #
Question
(a) Riverbed Co. sold $1,870,000 of 10%, 10-year bonds at 104 on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on July 1 and January 1. If Riverbed 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.)
(b) Marin Inc. issued $630,000 of 9%, 10-year bonds on June 30, 2017, for $590,744. This price provided a yield of 10% on the bonds. Interest is payable semiannually on December 31 and June 30. If Marin 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.)
Explanation / Answer
(A) Interest expense to be recorded = $89,760
(B)
Period Amount ($) Interest paid ($1,870,000 *10%*6/12) Period from January 1(July 1) to June 30 (December 31), 2017 93,500 Less: Premium amortization [($1,870,000*104%) - $1,870,000] / 20 Period from January 1, (July 1) to June 30 (December 31), 2017 (3,740) Interest expense to be recorded On July 1(December 31,) 2017 89,760Related Questions
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