Reference no: EM13872084
Purpose: This exercise will serve as an example for both the issuance of bonds between interest payment dates and the use of the straight-line method of amortization.
On May 1, 2014, Peter Pan Tools Corporation issued bonds payable with a face value of $1,400,000 at 104 plus accrued interest. They are registered bonds dated January 1, 2014, bear interest at 9% payable semiannually on January 1 and July 1, and mature January 1, 2024. The company uses the straight-line method of amortization.
Instructions
(a) Compute the amount of bond interest expense to be reported on Peter Pan's income statement for the year ended December 31, 2014. (Round computations to the nearest dollar.)
(b) Compute the amount of bond interest payable to be reported on Peter Pan's balance sheet at December 31, 2014.
(c) Compute the amount of bond interest expense to be reported on Peter Pan's income statement for the year ended December 31, 2015.
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