The Peg Corporation (TPC) issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2018. The stated interest rate was payable at the end of each year. The bonds mature at the end of four years. The following schedule has been prepared (amounts in thousands):

Required:

1. Complete the amortization schedule.

2. What was the maturity amount (face value) of the bonds?

3. How much cash was received at date of issuance of the bonds?

4. Was there a premium or a discount? If so, which and how much was it?

5. How much cash is paid for interest each period and will be paid in total for the full life of the bond issue?

6. What is the stated interest rate?

7. What is the market interest rate?

8. What amount of interest expense should be reported on the income statement each year?

9. Show how the bonds should be reported on the balance sheet at the end of 2019 and 2020.

Transcribed Image Text:

Date Cash Interest Amortization Balance January 1, 2018 End of year 2018 End of year 2019 End of year 2020 End of year 2021 $6,101 $450 $425 $25 ? 450 ? 25 6,051 6,026 450 25 450 424 26 6,000