P10-2 Reporting Bonds Issued at Par LO 10-2 On January 1, 2014, Nowell Company i
ID: 2655434 • Letter: P
Question
P10-2 Reporting Bonds Issued at Par LO 10-2 On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent. (If necessary, use the appropriate factor(s) from the tables provided.) ( FV of $1 PV of $1 FVA of $1 PVA of $1 ) Required: 1 What was the issue price on January 1, 2014? Issue price 2 What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? June 30, 2014 December 31, 2014 Interest expense $20,000 3 What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? June 30, 2014 December 31, 2014 Cash paid 4 What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015? December 31, 2014 December 31, 2015 Bonds payable P10-2 Reporting Bonds Issued at Par LO 10-2 On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent. (If necessary, use the appropriate factor(s) from the tables provided.) ( FV of $1 PV of $1 FVA of $1 PVA of $1 ) Required: 1 What was the issue price on January 1, 2014? Issue price 2 What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? June 30, 2014 December 31, 2014 Interest expense $20,000 3 What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? June 30, 2014 December 31, 2014 Cash paid 4 What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015? December 31, 2014 December 31, 2015 Bonds payableExplanation / Answer
1 What was the issue price on January 1, 2014?
Since Coupon Interest rate = Market Interest rate, Issue Price = Face Value
Issue price = $ 500,000
2 What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014?
Interest Expenses each semi annual period = 500000*8%*/12 = 20000
Interest expense on June 30, 2014 $20,000
Interest expense on December 31, 2014 $20,000
3 What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014?
Interest Expenses paid each semi annual period = 500000*8%*/12 = 20000
Cash paid June 30, 2014 = $ 20000
Cash paid December 31, 2014 = $ 20000
4 What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015?
Bonds payable December 31, 2014 = $ 500,000
Bonds payable December 31, 2015 = $ 500,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.