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?
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
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