Akron Corporation, whose annual accounting period ends on December 31, issued the following bonds: Date of bonds:
Question:
Akron Corporation, whose annual accounting period ends on December 31, issued the following bonds:
Date of bonds: January 1, 2011
Maturity amount and date: $100,000 due in 10 years
Interest: 10 percent per annum payable each June 30 and December 31
Date sold: January 1, 2011
Straight-line amortization is used.
Required:
1. Provide the following amounts to be reported on the December 31, 2011, financial statements:
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a. Interest expense
b. Bonds payable
c. Unamortized premium or discount
d. Net liability
e. Stated rate of interest
f. Cash interest paid
2. Explain why items (a) and (f) in requirement (1) are different.
3. Assume that you are an investment adviser and a retired person has written to you asking, "Why should I buy a bond at a premium when I can find one at a discount? Isn't that stupid? It's like paying list price for a car instead of negotiating a discount." Write a brief letter in response to thequestion.
Step by Step Answer:
Req 1 December 31 2011 x Financial statements Case A Case B Case C At Par 100 At 99 At 104 a Interes...View the full answer
