Y&R Corporation issued $10,000,000 of 7 percent, 20-year bonds at a premium. The bonds are retired prior

Question:

Y&R issued $10,000,000 of 7 percent, 20-year bonds at a premium. The bonds are retired prior to at 102. The book value of the bonds is $10,453,000 at this time. Y&R 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 Would the total cash interest paid be different if the company used the straight-line method of amortization of premiums? Explain.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...