Bonds payable are dated January 1, 2012, and are issued on that date. The face value of
Question:
Bonds payable are dated January 1, 2012, and are issued on that date. The face value of the bonds is $100,000, and the face rate of interest is 8%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 6%.
Required
1. Using the effective interest amortization method, what amount should be amortized for the first six-month period? What amount of interest expense should be reported for the first six month period?
2. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to December 31, 2012? What amount of interest expense should be reported for the period from July 1 to December 31, 2012?
Face ValueFace value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Step by Step Answer:
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1111534912
8th edition
Authors: Gary A. Porter, Curtis L. Norton