Bond Issue Price Merst Company issues $300,000 par value bonds with a stated interest rate of 10
Question:
Bond Issue Price Merst Company issues $300,000 par value bonds with a stated interest rate of 10 percent and an effective interest rate of 12 percent on J anuary |, 2001. The bonds mature on January 1, 2011 and pay interest semiannually. Merst uses the effective-interest method of amortization in computing interest expense.
a. Compute the issue price of the bonds.
b. What amount of interest will Merst pay at June 30, 2001?
What amount of interest expense will it record at June 30, 2001?
c. What amount of interest will Merst pay at December 31, 2001? What amount of interest expense will it record for the 6-month period ending December 31, 2001?
d. What will the book value of the bonds be at December 31, 2001?
e. Give the dollar amounts reported in Merst’s balance sheet at December 31, 2001.
Step by Step Answer:
Financial Accounting A Decision Making Approach
ISBN: 9780471328230
2nd Edition
Authors: Thomas E. King, Valdean C. Lembke, John H. Smith