Question
a. Assume that market interest rates were slightly lower than 12.5% when the bonds were sold. Would the proceeds from the bond issue have been
a. Assume that market interest rates were slightly lower than 12.5% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount?
The bonds will sell for more than their face amount.
The bonds will sell for less than their face amount.
The bonds will sell for equal to their face amount.
b. Independent of your answer to part (a), assume that the proceeds were $2,061,000. Use the horizontal model to show the effect of issuing the bonds. (assets = liabilities + stockholders equity)
c. Independent of your answer to part (a), assume that the proceeds were $2,061,000. Record the journal entry to show the effect of issuing the bonds.
d. Calculate the interest expense that Kaye Co. will show with respect to these bonds in its income statement for the fiscal year ended September 30, 2013, assuming that the premium of $61,000 is amortized on a straight-line basis.Round answers to whole dollars.
accrued interest payable:
premium amortization:
interest expense for 6 months:
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