Question
Brock Company issued $124,000 face value of bonds on January 1, 2014. The bonds had a 6 percent stated rate of interest and a 10-year
Brock Company issued $124,000 face value of bonds on January 1, 2014. The bonds had a 6 percent stated rate of interest and a 10-year term. Interest is paid in cash annually, beginning December 31, 2014. The bonds were issued at 97. |
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a. | Use a financial statements model like the one shown below to demonstrate how (1) the January 1, 2014, bond issue and (2) the December 31, 2014, recognition of interest expense, including the amortization of the discount and the cash payment, affects the companys financial statements. Use + for increase, ? for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA) and NA for not affected.
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