Problem 1: Indigo Co. sold $1,830,000 of 10%, 10-year bonds at 106 on January 1, 2017. The bonds were dated January 1, 2017 and pay interest on July 1 and January 1. If Indigo uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2017, and December 31, 2017.
Problem 2: Sweet Inc. issued $550,000 of 9%, 10-year bonds on June 30, 2017, for $515,729. This price provided a yield of 10% on the bonds. Interest is payable semiannually on December 31 and June 30. If Sweet uses the effective-interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2017.
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