Holze Music Co. issued 5\%, 10 -year bonds payable at 75 on December 31, 2006. At December 31, 2009, Holze reported the bonds payable as follows:

Holze uses the straight-line amortization method.

Requirements 

1. Answer the following questions about Holze's bonds payable:

a. What is the maturity value of the bonds?

b. What is the carrying amount of the bonds at December 31 , 2009?

c. What is Holze's annual cash interest payment on the bonds?

d. How much interest expense should Holze record each year?

2. Holze pays annual interest for these bonds each year on December 31. Record the 

December 31, 2010, annual interest payment and amortization of discount.

3. What will be the carrying amount of the bonds at December 31 , \(2010 ?\).

Transcribed Image Text:

Long-Term Debt: Bonds payable........ Less: Discount..... $200,000 (35,000) $165,000