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Renan Inc. issued $9.960.000 of 6 percent 20-year bonds at a premium. The bonds are retired prior to maturity at 102. The book value of
Renan Inc. issued $9.960.000 of 6 percent 20-year bonds at a premium. The bonds are retired prior to maturity at 102. The book value of the bonds is $10.451,000 at this time. Renan Inc. amortizes bond premiums using the effective interest method. Required 1. Was the contract rate on the bonds at the time of issuance greater or less than the market rate of interest? Explain 2. Prepare the journal entry to record the retirement of the bonds 3. Assume that the bonds were redeemed at maturity. Would the total cash interest paid be different if the company used the straight-line method of amortization of premiums? Explain Requirement 1. Was the contract rate on the bonds at the time of issuance greater or less than the market rate of interest? Explain The contract rate on the bonds is the market rate of interest at the time of issuance. This means that bond purchasers were willing to pay for the interest rate. Requirement 2 Prepare the journal entry to record the retirement of the bonds (Record debits first, then credits. Exclude explanations from journal entries.) Journal Entry Date Accounts Debit Credit Renan Inc. issued 59.960,000 of 6 percent, 20-year bonds at a premium. The bonds are retired prior to maturity at 102. The book value of the bonds is $10.451.000 at this time. Renan Inc amortizes bond premiums using th effective interest method. Required 1 Was the contract rate on the bonds at the time of issuance greater or less than the market rate of interest? Explain. 2. Prepare the journal entry to record the retirement of the bonds 3. Assume that the bonds were redeemed at maturity. Would the total cash interest paid be different if the company used the straight-line method of amortization of premiums? Explain. . . . Journal Entry Date Accounts Debit Credit Requirement 3 Assume that the bonds were redeemed at maturity. Would the total cash interest paid be different if the company used the straight-line method of amortization of premiums? Explain The straight-line method of amortizing the premium would amount of interest is paid at each interest period the total cash paid for interest. Interest payments are paid at the aver the life of the bond. Therefore encose tomar list or enter
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