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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

The following data relate to a $2,000,000, 8% bond issued for a selected semiannual interest period:

Bond carrying amount at beginning of period $2,125,000
Interest paid during period 160,000
Interest expense allocable to the period 148,750

(a) Were the bonds issued at a discount or at a premium? (b) What is the unamortized amount of the discount or premium account at the beginning of the period? (c) What account was debited to amortize the discount or premium?

(a)

To determine

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Discount on bonds: It occurs when the bonds are issued at a low price than the face value.

Premium on bonds: It occurs when the bonds are issued at a high price than the face value.

To identify: The issued price of bonds

Explanation

The bonds were issued at premium.

The bonds were issued at hi...

(b)

To determine

To identify: The unamortized amount of discount or premium account at the beginning of the period.

(c)

To determine

To identify: The account that was debited to amortize the discount or premium.

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