Question
On January 1, 2014, TCU Utilities issued $1,018,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 9 percent
| On January 1, 2014, TCU Utilities issued $1,018,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 9 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 14 percent. The company uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) |
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| Required: | |
| 1. | What was the issue price on January 1, 2014? |
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| 2. | What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? |
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| 3. | What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? |
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| 4. | What is the book value of the bonds on (a) June 30, 2014? and (b) December 31, 2014? |
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