Question

Three independent situations follow. Answer the ques- tions at the end of each situation.
1. Wen Corporation incurred the following costs when it issued bonds:
(a) Printing and engraving costs, $25,000;
(b) Legal fees, $69,000; and
(c) Commissions paid to underwriter, $70,000. What accounting treatment could be given to these costs?
2. Griffith Inc. sold $3 million of 10-year, 10% bonds at 104 on January 1, 201
2. The bonds were dated January 1, 2012, and pay interest on July 1 and January 1. If Griffith follows private entity GAAP and uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2012, and December 31, 2012.
3. Kennedy Inc. issued $600,000 of 10-year, 9% bonds on June 30, 2011, for $562,500. This price provided a yield of 10% on the bonds. Interest is payable semi-annually on December 31 and June 30. If Kennedy uses the effective interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2011.


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  • CreatedAugust 23, 2015
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