1. On January 1 of the current year, Barton Corporation issued 10% bonds with a
ID: 2406190 • Letter: 1
Question
1. On January 1 of the current year, Barton Corporation issued 10% bonds with a face value of $119,000. The bonds are sold for $113,050. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, five years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 is
a.$13,090
b.$595
c.$13,685
d.$5,950
2. If $664,000 of 7% bonds are issued at 94, the amount of cash received from the sale is
a.$664,000
b.$624,160
c.$710,480
d.$617,520
3. On January 1, Elias Corporation issued 7% bonds with a face value of $85,000. The bonds are sold for $82,450. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 10 years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is
a.$6,205
b.$496
c.$2,550
d.$5,950
4. Franklin Corporation issues $81,000, 10%, five-year bonds on January 1 for $84,600. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is
a.$3,240
b.$6,480
c.$3,690
d.$3,600
Explanation / Answer
1. Bond interest expense for the year ended December 31 is
= Interests paid during the year + amortised cost of issue=119000*.10/2*2+(119000-113050)/5=13090(a)
2. Amount of cash received from the sale is= 664000*.94=624160(b)
3. The bond interest expense for the year ended December 31 of the first year is
=Interests paid during the year + amortised cost of issue=85000*.07/2*2+(85000-82450)/10=6205(a)
4.Amount of bond interest expense to be recognized on July 1 is
=(Interests paid - amortised premiuim on issue) upto July 1=81000*.10/2-(84600-81000)/(5*2)=3690(c)
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