Question
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,108.
a) Using effective-interest amortization, how much interest expense will be recognized in 2017?
b) Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2017 balance sheet?
c) Using straight-line amortization, what is the carrying value of the bonds on December 31, 2018?
d) What is interest expense for 2018, using straight-line amortization?
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