This problem continues the Davis Consulting, Inc. situation from Problem P11-35 of Chapter 11. Davis Consulting is considering raising additional capital. Davis plans to raise the capital by issuing $ 400,000 of 8%, seven-year bonds on January 1, 2014. The bonds pay interest semiannually on June 30 and December 31. On January 1, 2014, the market rate of interest required by investors for similar bonds is 10%.

1. Will Davis’s bonds issue at face value, a premium, or a discount?
2. Calculate and record the cash received on the bond issue date.
3. Journalize the first interest payment on June 30 and amortize the premium or discount using the straight-line interest method.

  • CreatedJanuary 16, 2015
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