Reference no: EM132746046
Question - On April 1, Year 1, Knights Products, Inc. issued at par $25 million of 10%, 10-year bonds. Interest is payable semiannually each April 1 and October 1.
INSTRUCTIONS -
a) What is the amount of cash paid to bondholders for interest during Year 1?
b) Give the adjusting (Journal) entry necessary at December 31, Year 1 (if any), regarding this bond issue.
c) Interest expense on this bond issue reported in Knights Products' Year 1 income statement is _____________________. Show working.
d) With respect to this bond issue, Knights Products' balance sheet at December 31, Year 1, includes bonds payable of $________ and interest payable of $________ (indicate $0 or "none" if the item is not reported. Explain your answer.
e) Give the journal entry made by Knights Products on April 1, Year 2, to record the semiannual payment of interest to bondholders.
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