CF Unit6 P10-2 / On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years

CF Unit6 P10-2

P10-2 Reporting Bonds Issued at Par LO 10-2

On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent.

(If necessary, use the appropriate factor(s) from the tables provided.) (FV of $1 PV of $1 FVA of $1

PVA of $1

Required:

1 What was the issue price on January 1, 2014 ?

2 What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014?

3 What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014?

4 What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015?