During 2018 and 2019, Kale Co. completed the following transactions relating to its bond issue. The company's fiscal year ends on December 31. 2018 1 Issued $200,000 of 8 year, 6 percent bonds for $194,000. The semiannual cash payment for interest is due on March 1 and September 1, beginning September 2018. Mar. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. 2019 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Mar. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. Required a. When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? If the bonds had sold at face value, what amount of cash would Kale Co. have received? b. Prepare the liabilities section of the balance sheet at December 31, 2018 and 2019. c. Determine the amount of interest expense Kale would report on the income statements for 2018 and 2019. d. Determine the amount of interest Kale would pay to the bondholders in 2018 and 2019.
During 2018 and 2019, Kale Co. completed the following transactions relating to its bond issue. The company's fiscal year ends on December 31. 2018 1 Issued $200,000 of 8 year, 6 percent bonds for $194,000. The semiannual cash payment for interest is due on March 1 and September 1, beginning September 2018. Mar. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. 2019 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Mar. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. Required a. When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? If the bonds had sold at face value, what amount of cash would Kale Co. have received? b. Prepare the liabilities section of the balance sheet at December 31, 2018 and 2019. c. Determine the amount of interest expense Kale would report on the income statements for 2018 and 2019. d. Determine the amount of interest Kale would pay to the bondholders in 2018 and 2019.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:During 2018 and 2019, Kale Co. completed the following transactions relating to its bond issue. The company's fiscal year ends on
December 31.
2018
1 Issued $200,000 of 8 year, 6 percent bonds for $194,000. The semiannual cash payment for interest is due on
March 1 and September 1, beginning September 2018.
Mar.
Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment
for interest.
Dec. 31 Recognized accrued interest expense including the amortization of the discount.
2019
1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment
for interest.
Mar.
Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment
for interest.
Dec. 31 Recognized accrued interest expense including the amortization of the discount.
Required
a. When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? If the bonds had sold at
face value, what amount of cash would Kale Co. have received?
b. Prepare the liabilities section of the balance sheet at December 31, 2018 and 2019.
c. Determine the amount of interest expense Kale would report on the income statements for 2018 and 2019.
d. Determine the amount of interest Kale would pay to the bondholders in 2018 and 2019.
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