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

January 30, 2017

Question
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.) (.mhhe.com/connect/0077516958/fv.jpg”>FV of \$1 .mhhe.com/connect/0077516958/pv.jpg”>PV of \$1 .mhhe.com/connect/0077516958/fva.jpg”>FVA of \$1

.mhhe.com/connect/0077516958/pva.jpg”>PVA of \$1

Required:

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

Issue price

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

June 30, 2014

December 31, 2014

Interest expense

\$20,000

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

June 30, 2014

December 31, 2014

Cash paid

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

December 31, 2014

December 31, 2015

Bonds payable

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