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E10-23A Janus Company

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Exercise 10-23A Effective interest amortization of a bond premium
On January 1, 2013, Janus Company issued bonds with a face value of $200,000 a stated rate of
interest of 6% and a 10-year term to maturity. Interest is payable in cash on December 31
of each year. The effective rate of interest was 5% at the time the bonds were issued.
The bonds sold for $215,443 White used the effective interest rate method to amortize bond
discount.

Required
a. Determine the amount of the premium on the day of issue.
b. Determine the amount of interest expense recognized on December 31, 2013
c. Determine the carrying value of the bond liability on December 31, 2013
d. Provide the general journal entry necessary to record the December 31, 2013 interest
expense.

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