1. Klocke Corporation is planning to issue debentures with a face value of $10,000,000 on September 1, 2010. The debentures mature in 10 years and have a face interest rate of 8 percent that is paid semi-annually on March 1 and September 1 of each year. Klocke thinks the market interest rate will be 10%. Assume that Klocke has a fiscal year-end on Feb 28.

(A) Calculate the proceeds of the bond and set up an amortization schedule for the first year of the bonds life.

(B) Where will the proceeds of the bond be reported on the budgeted financial statements?

(C) What is the amount of interest expense Klocke will incur in the first year of the bonds life? What amount and where will the interest be reported on the budgeted financial statements for 2011.

(D) How will the bond be reported on the budgeted balance sheet for 2011.