Assume the same set of facts for stacy company as in, Ask an Expert

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Assume the same set of facts for stacy Company as in problem 10-2 except that the market rate og interest of Junuary 1, 2010 is 8% and the proceeds from the bond issuance equal $10,803

Required:
1. Prepare a five-year table (similar to Exhibit 10-5)to amortize the premium using the effective interest method.

2. What is the total interest expense over the life of the bonds? cash interest payment?
premium amortization?

3. Prepare the journal entry for the payment of interest and the amortization of premium on December 31,
2012 (the third year), and determine the balance sheet presentation of the bonds on that date.

Stacy Company issued five-year, 10% bonds with a face value of $10,000 on January 1,2010. Interest is paid annually on December 31. The market rate of interest on this date is 12%, and Stacy Company receives proceeds of $9,275 on the bond issuance.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9976033

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