An important application of Financial Accounting is the measurement, recording and balance sheet presentation of long-te

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An important application of Financial Accounting is the
measurement, recording and balance sheet presentation of long-term
liabilities. Since typical long-term liabilities involve bonds
payable, the following problem will deal with bonds payable in the
assigned homework and discuss at class.
Problem: (Total = 13 points)
Bond contract rate = 7% semi-annual
Bond par = $10,000
Bond market rate = 6% semi-annual
Bond life = 10 years
1) Find the selling price of this bond (2 pts)
2) Will it be sold at a discount or premium? (1 pt)
3) Do the journal entry for the issuance (2 pts)
4) Calculate the discount/premium amortization per period ( use the
straight-line method) (1 pt)
5) Do the entry for the payment of cash interest per period (2
pts)
6) Do the entry for the amortization of the discount/premium per
period (2pts)
7) Find total interest expense per period (1 pt)
8) Show the balance sheet presentation of the bond after two
periods have elapsed (2 pts)