Use the amortization table that you prepared for Potter Investment’s bonds in S9-9 to answer the following questions:
In S9-9, Potter Investments, Inc., issued $560,000 of 2.5% 10-year bonds payable on March 31, 2014. The market interest rate at the date of issuance was 3%, and the Potter Investments bonds pay interest semiannually. Potter’s year-end is March 31.
1. How much cash did Potter Investments borrow on March 31, 2014? How much cash will Potter Investments pay back at maturity on March 31, 2024?
2. How much cash interest will Potter Investments pay each six months?
3. How much interest expense will Potter Investments report on September 30, 2014, and on March 31, 2015? Why does the amount of interest expense increase each period?