On January 1, 2018, Reese Incorporated issued bonds with a face value of $120,000, a stated rate
Question:
On January 1, 2018, Reese Incorporated issued bonds with a face value of $120,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $124,920. Reese used the effective interest rate method to amortize bond premium.
Required
a. Prepare an amortization table, shown as follows. Round interest expense amounts to nearest whole dollar.
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b. What item(s) in the table would appear on the 2020 balance sheet?
c. What item(s) in the table would appear on the 2020 income statement?
d. What item(s) in the table would appear on the 2020 statement of cash flows?
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Step by Step Answer:
a Date Cash Payment Interest Expense Premium Amortization Carrying Value January 1 2018 124920 Dece...View the full answer
Survey of Accounting
ISBN: 978-1259631122
5th edition
Authors: Thomas Edmonds, Christopher Edmonds, Philip Olds, Frances McNair, Bor Yi Tsay
