References Mailings Review A Aav AS EVERY View 3 21 G ABCDE AalbCcDdB No Spacing Aa BbCcDc AaBbCcDc Aaib CcDdEe Heading 1 Tie Subtitle ca Subtle Normal Bond Homework Effects on the Accounting Equation Scenario: James Company issues a $250,000, 10 year bond that pays interest semi-annually on March 1and September 1", the stated rate on the bond is 12%. Issue Date of the bond is March 1 Situation 4 - Market Rate = 12%; Selling Price = $250,000 Situation B - Market Rate = 10%; Selling Price - $281,155 Situation - Market Rate -14%; Selling Price $223,515 Required: 1. Identify if the bond traded at a premium, discount or par in each of the three situations. Situation A Situation B Situation 2. For the situations in which the bond traded at a premium/discount, determine the dollar amount of the premium and discount. Then, assuming that the premium and discount are amortized over the life of the bond on a straight-line basis, determine the amount of premium and discount that should be amortized cach interest payment period. Premium Amortized Premium Discount Amortized Discount 3. For each of the three situations, show the effects on the accounting equation for 3. For each of the three situations, show the effects on the accounting equation for: a. The issuance of the bond on March 14 b. The subsequent payment of interest on September 1st c. End of period adjustment on December 31" d. Interest payment on March 1 (year after issuance). 4. For each of the three situations, determine that total amount of cash paid to the investor over the life of the bond and determine the amount of interest expense incurred by issuer over the life of the bond. a. Situation A i. Cash Payments ii. Interest Expense b. Situation B i. Cash Payments ii. Interest Expense c. Situation C i. Cash Payments ii. Interest Expense