Exercise 14-8 Presented below are three independent situations. (a) Skysong Co.

Question

Exercise 14-8

Presented below are three independent situations.

(a) Skysong Co. sold $1,880,000 of 12%, 10-year bonds at 105 on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on July 1 and January 1. If Skysong 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.)

Interest expense to be recorded

(b) Concord Inc. issued $590,000 of 9%, 10-year bonds on June 30, 2017, for $488,488. This price provided a yield of 12% on the bonds. Interest is payable semiannually on December 31 and June 30. If Concord 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.)

Interest expense to be recorded

Explanation / Answer

a Premium on bonds payable=1880000*0.05= $94000 Interest expense to be recorded=(1880000*12%/2)-(94000/20)= $108100 b Interest expense to be recorded =488488*12%/12*4= $19540

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