Marshalls Corporation completed a $500,000, 7 percent bond issue on January 1, 2013. The bonds pay interest each December 31 and mature 10 years from January 1, 2013.
Required:
1. Provide the following amounts to be reported on the January 1, 2013, financial statements immediately after the bonds were issued:
Case A (issued at 100) Case B (at 98) Case C (at 102)
a. Bonds payable........................................... $................................. $...................... $
b. Unamortized premium (or discount)
c. Carrying value
2. Assume that you are an investment adviser and a retired person has written to you asking,
"Why should I buy a bond at a premium when I can find one at a discount? Isn't that stupid?
It's like paying list price for a car instead of negotiating a discount." Write a brief message in response to the question.