Spencer's Shop entered into the following transactions during 2023. On January 1, 2023, sold $620,000 of its own 5%, 10-year bonds. Interest is payable annually on December 31. The bonds were sold to yield an effective interest rate of 6%. Spencer uses the effective interest rate method. The bonds sold for $574,368.

Requirements:

1. Was Spencer's Bond issued at a premium or discount?

2. What is the amount of the premium or discount?

3. What amount of cash will Spencer's Shop pay out in interest in 2023?

4. What amount of interest expense will incur and record in 2023?

5. What amount will be shown in the December 31, 2024 balance sheet as the carrying value of the bonds?

6. Record journal entries for the following

a. Bond issue

b. Interest Payment on December 31, 2023.

c. Interest Payment on December 31, 2024

1Premium or Discount? 2What is the amount of the premium or discount? 3Cash Interest Paid in 2023 4Interest Expense in 2023 5What is the Carrying value (book value) of the bond on December 31, 2024