Question

Waxman Corporation has $2,000,000 of 9.5 percent, 25-year bonds dated March 1, 20101, with interest payable on February 28 and August 31. The company’s fiscal year-end is February 28. It uses the straight-line method to amortize bond premiums or discounts.

REQUIRED
1. Assume the bonds are issued at 102.5 on March 1, 2011. Prepare journal entries for March 1, 2011; August 31, 2011; and February 28, 2012.
2. Assume the bonds are issued at 97.5 on March 1, 2011. Prepare journal entries for March 1, 2011; August 31, 2011; and February 28, 2012.
3. Explain the role that market interest rates play in causing a premium in requirement 1 and a discount in requirement 2.



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  • CreatedSeptember 10, 2014
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