Question

Consider the following independent situations. If necessary, assume the straight-line method of amortization.
1. A company issues a $100,000, 5-year, 4% bond for $102,000 and increases the Bond Payable account by $102,000.
2. A company issues a $250,000, 8-year, 8% bond for $240,000. On the first semiannual interest payment, the company amortizes $1,250 of the bond discount.
3. A company redeems an $85,000 bond with a carrying value of $86,000 for $85,000 and records a $1,000 gain on redemption.
4. A company issues $50,000 of bonds with a 6% stated interest rate when the market rate of interest is 7%. At the first semiannual interest payment date, the company pays $1,750.
Required
For each situation, identify whether the company made an error and if so, what the company should have done.


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  • CreatedJuly 16, 2015
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