Question

Sikes Corporation, whose fiscal year ends on December 31, issued the following bonds:
Date of bonds: January 1, 2015
Maturity amount and date: $ 10 million due in 10 years (December 31, 2024)
Interest: 5 percent per annum payable each December 31
Date of sale: January 1, 2015
Required:
1. Provide the following amounts to be reported on the 2015 financial statements (use straight- line amortization and show amounts in thousands):
2. For each of cases B and C, explain why interest expense is different from cash paid for interest.
3. Assume that you are an investment adviser and a retired person has written to you asking, “Why should I buy a bond at a premium when I can find one at a discount? Isn’t that stupid? It’s like paying the list price for a car instead of negotiating a discount.” Write a brief letter in response to the question.


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  • CreatedAugust 04, 2015
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