Straight-Line Method

Norris Corporation issued $2,000,000 in 10.5 percent, 10-year bonds on February 1, 2014, at 104. Semiannual interest payment dates are January 31 and July 31. Use the straight-line method and ignore year-end accruals.

Valuing Bonds Using Present Value

Use the present value tables 1 and 2 to calculate the issue price of a $600,000 bond issue in each of the following independent cases. Assume interest is paid semiannually.

Bond Retirement

Freed Corporation has outstanding $800,000 of 8 percent bonds callable at 104. On September 1, immediately after recording the payment of the semiannual interest and the amortization of the discount, the unamortized bond discount equaled $21,000. On that date, $480,000 of the bonds was called and retired.

Recording Lease Obligations

Use Table 1 and Table 2 to calculate present value answers.

Rigby Corporation has leased a piece of equipment that has a useful life of 12 years. This capital lease requires payments of $86,000 per year for 12 years. Rigby currently is able to borrow money at a long-term interest rate of 15 percent. Round your answers to the nearest dollar.

Exercise 11-6 Straight-Line Method Norris Corporation issued $2,000,000 in 10.5 percent, 10-year bonds on February 1, 2014, at 104. Semiannual interest payment dates are January 31 and July 31. Use the straight-line method and ignore year-end accruals 1. With regard to the bond issue on February 1, 2014: a. How much cash is received? b. How much is Bonds Payable? c. What is the difference between a and b called? Unamortized bond premium How much is it? 2. With regard to the bond interest payment on July 31, 2014: a. How much cash is paid in interest? b. How much is the amortization? c. How much is interest expense? 3. With regard to the bond interest payment on January 31, 2015: a. How much cash is paid in interest? b. How much is the amortization? c. How much is interest expense