1) Remsen Company issues 10-year bonds, as follows: Bonds are dated to be issued
ID: 2558694 • Letter: 1
Question
1) Remsen Company issues 10-year bonds, as follows: Bonds are dated to be issued on: Bonds are issued on Par value of bonds: Stated annual interest rate: Semiannual interest payments Amortization method used: April 1, 20x4 June 1, 20x4 600,000 4% April 1 and October 1 Straight-line REQUIRED a) If the bonds are sold at par, what amount of cash would the Remsen Company receive on June 1, 20x4 b) If the bonds are sold at a price of 103 on August 1, what amount of cash would the Remsen Company receive on August 1, 20x4? c) Continuing with the example in part (b) above: what is the amount of interest expense reported on the income statement for the year ended December 31, 20x4?Explanation / Answer
a) Cash received on June 1, 20x4 = Par value + Accrued interest for 2 months = $600000 + ($600000 x 4% x 2/12) = $600000 + $4000 = $604000
b) Cash received on August 1, 20x4 = Par value + Premium + Accrued interest for 4 months = ($600000 x 103/100) + ($600000 x 4% x 4/12) = $618000 + $8000 = $626000
c) Interest expense reported = $3100 + $5550 = $8650
Date Account Title Debit Credit Jun. 1, 20x4 Cash 604000 Bonds payable 600000 Interest payable ($600000 x 4% x 2/12) 4000Related Questions
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