Question
On January 1, 2021, Yellow Company issued a 4% $100,000 bond for $92,000. The market rate for a bond of this type is 6%. The
On January 1, 2021, Yellow Company issued a 4% $100,000 bond for $92,000. The market rate for a bond of this type is 6%. The bond pays interest semi-annually on June 30 and December 31. The bond is a 5-year bond.
- 1) Use the data above. What is the total interest expense for this bond on June 30, 2021 assuming that the company uses the effective interest method of amortization?
- 2) Use the data above. What is the total interest expense for this bond on December 31, 2021 assuming that the company uses the effective interest method of amortization?
- 3) Use the data above. What is the carrying value of the bond on December 31, 2021 assuming the company uses the straight-line method of amortization?
- 4) Use the data above. What is the total interest expense for the bond at June 30, 2021 assuming the company uses the straight-line method of amortization?
- 5) Use the data above. What is the carrying value of the bond on December 31, 2024 assuming the company uses the straight-line method of amortization?
- 6) Use the data above. What is the total interest expense over the life of this bond assuming the straight-line method of amortization?
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Financial Accounting Theory
Authors: Craig Deegan, H. Bierman
4th Edition
0071013148, 978-0071013147
