Grand Company Authorized $150,000 of 5-Year Bonds Dated January 1

question 84

Essay

Grand Company authorized $150,000 of 5-year bonds dated January 1, 2015. The stated rate of interest was 14%, payable annually each December 31. The bonds were issued on January 1, 2013, when the market interest rate was 12%. Assume effective-interest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for 5 periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, for 5 periods at 7% is 4.1002, and for 5 periods at 12% is 3.6048). Round to the nearest dollar.
Required:
A. What would be the amount of premium amortization for December 31, 2015? No adjusting journal entries have been made during the year.
B. What would be the amount of the interest payment on December 31, 2015?

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Definitions:

Inanimate Objects

Objects that lack life or consciousness, typically referring to items that are not alive.

Formal Operational Stage

The last of Jean Piaget's four stages of cognitive development, where abstract, logical thinking develops.

Concrete Operational Stage

A developmental phase in Piaget's theory of cognitive development, from approximately 7 to 11 years old, where children gain the ability to think logically about concrete events.

Sensorimotor Stage

The first of Jean Piaget's stages of cognitive development, where infants learn about the world through their sensory and motor interactions.