Assignment
On July 1, 2015, the Dobbs company issues $2,000,000 of 5% 5 year bonds at 105, interest is payable each year on June 30 and December 31.
1. What is the par value of the bonds?
2. Were the bonds issued at a discount or premium?
3. When the bonds were issued, is the contract rate greater or less than the market rate?
4. How much interest should be paid on December 31, 2015?
5. How much cash was received when the bonds were issued?
6. How much of the discount or premium should be amortized with the first interest payment?
7. What amount of interest expense would be reported on the income statement related these bonds?
8. What would be the carrying value of these bonds on the Dec. 31 2016 Balance sheet?