1. Journalize the following transactions of Farm Equipment Limited:
2014
Jan. 1 Issued $100,000 of 8%, five-year bonds at 94.
July 1 Paid semi-annual interest and amortized the bonds by the straight-line method on our 8% bonds payable.
Dec. 31 Accrued semi-annual interest expense and amortized the bonds by the straight-line method on our 8% bonds payable.
2015
Jan. 1 Paid semi-annual interest.
2019
Jan. 1 Paid the 8% bonds at maturity.
2. At December 31, 2014, after all year-end adjustments, determine the carrying amount of Farm Equipment Limited's bonds payable, net.
3. For the six months ended July 1, 2014, determine the following for Farm Equipment Limited:
a. Interest expense
b. Cash interest paid
What causes interest expense on the bonds to exceed cash interest paid?