During 2014 and 2015, Cook Co. completed the following transactions relating to

Question

During 2014 and 2015, Cook Co. completed the following transactions relating to its bond issue. The company’s fiscal year ends on December 31.

Issued $360,000 of ten-year, 7 percent bonds for $354,000. The semiannual cash payment for interest is due on March 1 and September 1, beginning September 2014.

Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest.

Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest.

Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest.

When the bonds were issued, was the market rate of interest more or less than the stated rate of interest?

If the bonds had sold at face value, what amount of cash would Cook Co. have received?

Prepare the liabilities section of the balance sheet at December 31, 2014 and 2015.

Determine the amount of interest expense Cook would report on the income statements for 2014 and 2015.

Determine the amount of interest Cook would pay to the bondholders in 2014 and 2015.

During 2014 and 2015, Cook Co. completed the following transactions relating to its bond issue. The company’s fiscal year ends on December 31.

Explanation / Answer

Answer:a-1 When the bonds were issued, was the market rate of interest is than the stated rate of interest. because bonds is issued at discount.

Answer:a-2 If the bonds had sold at face value,$360000 amount of cash would Cook Co. have received.

Answer:c Interest expense:

2014=$12900 (360000*3.5%)+300

2015=25800 (360000*7%)+600

Answer:d 2014=12600 (360000*3.5%)

2015=25200

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