XYZ issues a $1,000,000 bond that matures in 5 years on January 1, 2012. The bond pays interest annually and has an interest rate of 6% and the market rate is 4%. 1. What is the issuing price of the bond? 2. What is the interest expense on December 31, 2012, using the straight-line method? 3. What is the interest expense on December 31, 2012, using the effective- interest method? 4. What is the amortization amount on December 31, 2012, using the effective-interest method?
XYZ issues a $1,000,000 bond that matures in 5 years on January 1, 2012. The bond pays interest annually and has an interest rate of 6% and the market rate is 4%. 1. What is the issuing price of the bond? 2. What is the interest expense on December 31, 2012, using the straight-line method? 3. What is the interest expense on December 31, 2012, using the effective- interest method? 4. What is the amortization amount on December 31, 2012, using the effective-interest method?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:XYZ issues a $1,000,000 bond that matures in 5 years on January 1, 2012. The
bond pays interest annually and has an interest rate of 6% and the market
rate is 4%.
1. What is the issuing price of the bond?
2. What is the interest expense on December 31, 2012, using the straight-line
method?
3. What is the interest expense on December 31, 2012, using the effective-
interest method?
4. What is the amortization amount on December 31, 2012, using the
effective-interest method?
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