Northern Corporation issued $800,000 of 7% bonds on March 1, 20X8. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.
· Case A-The bonds are issued at 100.
· Case B-The bonds are issued at 96.
· Case C-The bonds are issued at 105.
Southlake uses the straight-line method of amortization.
Instructions:
Complete the following table:
Case A
Case B
Case C
Cash inflow on the issuance date
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Total cash outflow through maturity
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Total borrowing cost over the life of the bond issue
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Interest expense for the year ended December 31, 20X8
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Amortization for the year ended December 31, 20X8
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Unamortized premium as of December 31, 20X8
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Unamortized discount as of December 31, 20X8
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Bond carrying value as of December 31, 20X8
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