On January 1, 2015, Crabb & Co. issued 10-year bonds with a total face value of $500,000. The bond requires annual interest payments on December 31 at a stated rate of 6%. Bonds with similar features are discounted in the market at 8%. 

Were the bonds issued at a discount or a premium? 

How much cash will Crabb & Co. receive from issuing the bond? 

How does this transaction affect Crabb & Co.’s balance sheet on the date of the issuance? 

CashBonds PayableDiscount on Bonds Payable DATEACCOUNT NAMEDEBITCREDITBALANCE SHEETINCOME STMT A=L+ER -E 01/01/15 

What is the amount of cash interest paid by Crabb & Co. in 2015? 

What is the amount of interest expense on the income statement in 2015? 

What is the carrying value of the bond on December 31, 2015?   

Prepare the entry at 12/31/15 to record interest expense, cash paid, and discount amortization. DATEACCOUNT NAMEDEBITCREDITBALANCE SHEETINCOME STMT A=L+ER -E 12/31/15 Statement of Cash Flows20152016 Issuance of bond (F) Paid interest (O) Income Statement Interest expense Balance Sheet Cash Change in Total Assets Bonds payable, net of discount Retained earnings Change in Total Liabilities & Equity