Santa Corporation issued a bond on January 1 of this year with a face value of $1,000. The bond's coupon rate is 5 percent and interest is paid once a year on December 31. The bond matures in three years. The annual market rate of interest was 7 percent at the time the bond was sold. The following amortization schedule pertains to the bond issued: Cash Interest Paid Expense Amortization Balance January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 $50 50 50 $66 67 69 $16 17 19 $948 964 981 1,000 Required: 1. What was the bond's issue price? 2. Did the bond sell at a discount or a premium? How much was the premium or discount? 3. What amount(s) should be shown on the balance sheet for bonds payable at the end of Year 1 and Year 2? 4. Show how the following amounts were computed for Year 2: (a) $50, (b) $67, (c) $17, and (d) $981.
Santa Corporation issued a bond on January 1 of this year with a face value of $1,000. The bond's coupon rate is 5 percent and interest is paid once a year on December 31. The bond matures in three years. The annual market rate of interest was 7 percent at the time the bond was sold. The following amortization schedule pertains to the bond issued: Cash Interest Paid Expense Amortization Balance January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 $50 50 50 $66 67 69 $16 17 19 $948 964 981 1,000 Required: 1. What was the bond's issue price? 2. Did the bond sell at a discount or a premium? How much was the premium or discount? 3. What amount(s) should be shown on the balance sheet for bonds payable at the end of Year 1 and Year 2? 4. Show how the following amounts were computed for Year 2: (a) $50, (b) $67, (c) $17, and (d) $981.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question

Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req 1 to 3
Req 4
Show how the following amounts were computed for Year 2: (a) $50, (b) $67, (c)
decimals. Enter all amounts as positive values.)
(a)
(b)
(c)
$ 50
%3D
$ 67 (rounded)
$ 17
%3D
(d)
$ 981
II
II

Transcribed Image Text:Santa Corporation issued a bond on January 1 of this year with a face value of $1,000. The bond's coupon rate is 5 percent and
interest is paid once a year on December 31. The bond matures in three years. The annual market rate of interest was 7 percent at the
time the bond was sold. The following amortization schedule pertains to the bond issued:
Cash
Paid
Interest
Expense Amortization
Balance
January 1, Year 1
December 31, Year 1
December 31, Year 2
December 31, Year 3
$50
50
50
$66
67
69
$948
964
981
$16
17
19
1,000
Required:
1. What was the bond's issue price?
2. Did the bond sell at a discount or a premium? How much was the premium or discount?
3. What amount(s) should be shown on the balance sheet for bonds payable at the end of Year 1 and Year 2?
4. Show how the following amounts were computed for Year 2: (a) $50, (b) $67, (c) $17, and (d) $981.
Complete this question by entering your answers in the tabs below.
Req 1 to 3
Req 4
1. What was the bond's issue price?
2. Did the bond sell at a discount or a premium? How much was the premium or discount?
3. What amount(s) should be shown on the balance sheet for bonds payable at the end of Year 1 and Year 2?
1.
Bond issue price
2.
Bonds payable year 1
3.
Bonds payable year 2
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