The Peg Corporation (TPC) issued bonds and received cash in full for the issue price. The bonds

Question:

The Peg Corporation (TPC) issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2014. The stated interest rate was payable at the end of each year. The bonds mature at the end of four years. The following schedule has been prepared (amounts in thousands):

Cash Amortization Balance Date January 1, 2014 End of year 2014 End of year 2015 End of year 2016 End of year 2017 Inter

Required:
1. Complete the amortization schedule.
The switch in amortization from $25 to $26 in 2017 is caused by rounding.
2. What was the maturity amount (face value) of the bonds?
3. How much cash was received at date of issuance of the bonds?
4. Was there a premium or a discount? If so, which and how much was it?
5. How much cash is paid for interest each period and will be paid in total for the full life of the bond issue?
6. What is the stated interest rate?
7. What is the market interest rate?
8. What amount of interest expense should be reported on the income statement each year?
9. Show how the bonds should be reported on the balance sheet at the end of 2015 and 2016.

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