Question: On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate of 8 percent

On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent.

Required:
1. What was the issue price on January 1, 2014?
2. What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014?
3. What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014?
4. What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015?

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Req 1 Interest 500000 x 8 40000 2 20000 Present value 500000 x 6756 337800 200... View full answer

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