Return to the facts of A13-6

Data From Assignment -13-6

Mathieson Co. issues a $10,000,000, 6 ½ % bond on 1 October 20X4. At this time, market interest rates are in the range of 6%. The bond had a 10-year life from 1 October 20X4, and paid interest semi-annually on 31 March and 30 September.

Required:
1. Calculate the proceeds that would be raised on bond issuance.
2. Prepare an amortization table using the straight-line method of amortization, permitted under ASPE standards. Complete the first four payments only.
3. Prepare journal entries for 20X4 and 20X5, using the straight-line method. ABC has a 31 December fiscal year-end.
4. Why is the effective interest method preferable to the straight-line method? What is the advantage of the straight-line method? Why does ASPE allow the straight-line method?