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On January 1, 2018, Reese Incorporated issued bonds with a face value of $120,000, a stated rate of interest of 8 percent, and a five- year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $124,920. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item(s) in the table would appear on the 2020 balance sheet? c. What item(s) in the table would appear on the 2020 income statement? d. What item(s) and amount in the table would appear on the 2020 statement of cash flows (Direct Method) and under what section the bond liability appear?

On January 1, 2018, Reese Incorporated issued bonds with a face value of $120,000, a stated rate of interest of 8 percent, and a five- year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $124,920. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item(s) in the table would appear on the 2020 balance sheet? c. What item(s) in the table would appear on the 2020 income statement? d. What item(s) and amount in the table would appear on the 2020 statement of cash flows (Direct Method) and under what section the bond liability appear?

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 7C
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On January 1, 2018, Reese Incorporated issued bonds with a face value of $120,000, a stated rate of interest of 8 percent, and a five- year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $124,920. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item(s) in the table would appear on the 2020 balance sheet? c. What item(s) in the table would appear on the 2020 income statement? d. What item(s) and amount in the table would appear on the 2020 statement of cash flows (Direct Method) and under what section the bond liability appear?
Transcribed Image Text:On January 1, 2018, Reese Incorporated issued bonds with a face value of $120,000, a stated rate of interest of 8 percent, and a five- year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $124,920. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item(s) in the table would appear on the 2020 balance sheet? c. What item(s) in the table would appear on the 2020 income statement? d. What item(s) and amount in the table would appear on the 2020 statement of cash flows (Direct Method) and under what section the bond liability appear?
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