Santa Corporation issued a bond on January 1 of this year with a face value of $1,000. The bond's coupon rate is 6 percent and interest is paid once a year on December 31. The bond matures in three years. The annual market rate of interest was 8 percent at the time the bond was sold.
The following amortization schedule pertains to the bond issued:
Cash
Paid Interest
Expense Amortization Balance
January 1, Year 1 $948
December 31, Year 1 $60 $76 $16 964
December 31, Year 2 60 77 17 981
December 31, Year 3 60 79 19 1,000
Required:
1. What was the bond's issue price?
2. Did the bond sell at a discount or a premium? How much was the premium or discount?
3. What amount(s) should be shown on the balance sheet for bonds payable at the end of Year 1 and Year 2?
4. Show how the following amounts were computed for Year 2: (a) $60, (b) $77, (c) $17, and (d) $981. (Enter percentages in decimals.)
Answers: 1
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Santa Corporation issued a bond on January 1 of this year with a face value of $1,000. The bond's co...
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