PA2. LO 13.1 On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond. For your extra credit please address the following items: 1.) Prepare the journal entry for issuance on July 1. 2.) Prepare the journal entry to record the first interest payment and amortization. Use December 31 as your date for this entry. Show your work. 3.) What is the bond's carrying value at December 31. Show your work.
PA2. LO 13.1 On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond. For your extra credit please address the following items: 1.) Prepare the journal entry for issuance on July 1. 2.) Prepare the journal entry to record the first interest payment and amortization. Use December 31 as your date for this entry. Show your work. 3.) What is the bond's carrying value at December 31. Show your work.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:PA2. LO 13.1 On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%.
The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the
bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the
bond.
For your extra credit please address the following items:
1.) Prepare the journal entry for issuance on July 1.
2.) Prepare the journal entry to record the first interest payment and amortization. Use December 31
as your date for this entry. Show your work.
3.) What is the bond's carrying value at December 31. Show your work.
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