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Posted by: Homeworkhelp
Price Quoted by Student: $7
Posted On: 2011-03-08 06:06:17
 
Question

Problem 14-3A Saturn issues 6.5%, five-year bonds dated January 1, 2004, with a $500,000 par Problem 14-4AB

 

Problem 14-3A Straight-line amortization of bond premium; computing bond price

 

ANSER KEY

Fundamental Accounting Principles, 17th Ed Larson Wild Chiappetta

 

Problem 14-3A Saturn issues 6.5%, five-year bonds dated January 1, 2004, with a $500,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $510,666. The annual market rate is 6% on the issue date.

 

Required

1. Calculate the total bond interest expense over the bonds’ life.

2. Prepare a straight-line amortization table like Exhibit 14.11 for the bonds’ life.

3. Prepare the journal entries to record the first two interest payments.

 

Problem 14-4AB Effective interest amortization of bond premium; computing bond

Problem 14-4AB Refer to the bond details in Problem 14-3A.

 

Required

1. Compute the total bond interest expense over the bonds’ life.

2. Prepare an effective interest amortization table like the one in Exhibit 14B.2 for the bonds’ life.

3. Prepare the journal entries to record the first two interest payments.

4. Use the market rate at issuance to compute the present value of the remaining cash flows for these bonds as of December 31, 2006. Compare your answer with the amount shown on the amortization table as the balance for that date (from part 2) and explain your findings.


Solutions
ANSWER KEY Problem 14-3A Problem 14-4AB  
Price $7
Attachment 1: P 14-3A, 14-4AB Saturn issues.doc
Solution Posted By: Homeworkhelp    Posted on: 08-03-2011