Question
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 96 resulting in a 4% discount.
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 96 resulting in a 4% discount. They had a 20-year term and a stated rate of interest of 7%.Which of the following shows how the bond issue will affect Residences financial statements on January 1, Year 1?
| Balance Sheet | Income Statement | Statement of Cash Flows | |||||||||
| Assets | = | Carrying Value Bond Liability | + | Equity | Rev. | ? | Exp. | = | Net Inc. | ||
| A. | 50,000 | = | 48,000 | + | 2,000 | NA | ? | NA | = | NA | 48,000 FA |
| B. | 48,000 | = | 48,000 | + | NA | NA | ? | NA | = | NA | 48,000 FA |
| C. | 52,000 | = | 52,000 | + | NA | NA | ? | NA | = | NA | 52,000 FA |
| D. | 50,000 | = | 52,000 | + | NA | NA | ? | NA | = | NA | 50,000 FA |
A. Option a
B. Option b
C. Option c
D. Option d
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Sawyer's Internal Auditing The Practice Of Modern Internal Auditing
Authors: Lawrence Sawyer, Mortimer Dittenhofer, James Scheiner
5th Edition
0894131788, 978-0894131783
