Bond Discount with Interest Paid Semiannually Pear Corporation receives $474,624 when it issues $500,000 of 3-year bonds
Question:
Bond Discount with Interest Paid Semiannually Pear Corporation receives $474,624 when it issues $500,000 of 3-year bonds with a stated interest rate of 8 percent. Interest is paid every 6 months. The current market rate for similarly rated bonds at the time of issue is 10 percent.
Assuming the bonds are issued on January | and the effective-interest method of amortization is used in computing interest expense:
a. What amount of interest expense will Pear report for the first 6 months?
b. What amount of interest expense will Pear report for the second interest-payment period?
c. Prepare a bond interest and amortization table for the life of the bonds, as illustrated in Exhibit 11-5.
Step by Step Answer:
Financial Accounting A Decision Making Approach
ISBN: 9780471328230
2nd Edition
Authors: Thomas E. King, Valdean C. Lembke, John H. Smith