On January 1, 2014, Cron Corporation issued $740,000 in bonds that mature in ten years. The...

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Accounting

On January 1, 2014, Cron Corporation issued $740,000 in bonds thatmature in ten years. The bonds have a stated interest rate of 12percent and pay interest on June 30 and December 31 each year. Whenthe bonds were sold, the market rate of interest was 10 percent.The company uses the effective-interest amortization method. (FV of$1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tablesprovided.)
Required:
1.
What was the issue price on January 1, 2014?

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

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

4.
What is the book value of the bonds on (a) June 30, 2014? and (b)December 31, 2014?

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Solution Cron Corporation Determination of the issue price on January 1 2014 Issue price PV of bonds PV of the annuity semiannual interest payments over 20 periods at market rate of 5 PV bonds PV 740000 PF 20 5 PV of bonds 740000 x 03769 278906 Semiannual interest 740000 x x 12 44400 PV of annuity of semiannual interest payments 44400 PA 20 5 PV of annuity of semiannual interest payments See Answer

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On January 1, 2014, Cron Corporation issued $740,000 in bonds thatmature in ten years. The bonds have a stated interest rate of 12percent and pay interest on June 30 and December 31 each year. Whenthe bonds were sold, the market rate of interest was 10 percent.The company uses the effective-interest amortization method. (FV of$1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tablesprovided.)Required:1.What was the issue price on January 1, 2014? 2.What amount of interest expense should be recorded on (a) June 30,2014? and (b) December 31, 2014? 3.What amount of cash interest should be paid on (a) June 30, 2014?and (b) December 31, 2014? 4.What is the book value of the bonds on (a) June 30, 2014? and (b)December 31, 2014?

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

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

4.	What is the book value of the bonds on (a) June 30, 2014? and (b)December 31, 2014?