Question
Diaz Company issued bonds with a $98,000 face value on January 1, Year 1. The bonds had a 6 percent stated rate of interest and
Diaz Company issued bonds with a $98,000 face value on January 1, Year 1. The bonds had a 6 percent stated rate of interest and a 10-year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 97. The straight-line method is used for amortization.
b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 2. e. Determine the amount of interest expense reported on the Year 2 income statement.
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