Question
Vadercat Limited issued $50 million 7.5 percent, 10 year bonds on October 1, 2019. The market rate of interest on the date of the issue
Vadercat Limited issued $50 million 7.5 percent, 10 year bonds on October 1, 2019. The market rate of interest on the date of the issue was 8 percent. Interest is payable semi-annually on April 1 and October 1. The companys year-end is December 31.
Required:
a. Prepare journal entries to record all transactions during the first year the bonds are outstanding. The company uses the straight-line method of amortizations.
b. Indicate how the bond obligation would be shown on the companys year-end statement of financial position.
c. How much interest expense is shown on the 2019 year end income statement?
d. How much interest expense will be shown on the 2020 year end income statement?
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