Question: 1. On Jan 1, 2012 Orleans Corp. issued a $300,000, 3 year , 6% installment note payable with payments of $100,000 principal and interest due on Jan 1st for each of the next 3 years.
a. Prepare the adjusting journal entry to accrue interest at the end of the 2nd year - 12/31/13.
b. Show the account(s) and amount (s) and where the accounts (s) will appear on a multi-step income statement prepared on Dec 31,2012.
c. Show the accounts and amounts and where the accounts will appear on a classified balance sheet prepared on Dec. 31,2012. 2.
2. Galaxy Company issued $2,000,000 of 7.5%, 6-year bond dated March 1, 2013, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1, 2013, at 97. Galaxy's year-end is Dec 31.
a. were the bonds issued at a premium, a discount , or at par?
b. was the market rate of interest higher ,lower, or the same as the contract rate of interest?
c. if the company uses the straight-line method of amortization, what is the amount of interest expense Galaxy will show for the year ended Dec 31,2013?
d. What is the carrying value of the bonds on Dec 31, 2013?