Stanton Company Issued Ten-Year 7% Bonds with a Face Value

question 159

Essay

Stanton Company issued ten-year 7% bonds with a face value of $100,000, for $96,567.94 on January 1, Year 1, when the market (effective)rate of interest was 7.5%. The bonds pay annual interest each December 31. Stanton uses the effective interest method to amortize bond discounts and premiums. (Round your answers to two decimal places.)Required:a)Determine the annual amount of cash that will be paid to bondholders for interest.b)Calculate the amounts of:(1)Interest expense in Year 1(2)Discount amortization in Year 1(3)Carrying amount of the liability on December 31, Year 1c)Calculate the amounts of:(1)Interest expense in Year 2(2)Premium amortization in Year 2(3)Carrying amount of the liability at December 31, Year 2?d)Determine the total amount of interest that will be recorded in interest expense over the life of the bond.

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Definitions:

Retirement Benefits

Payments or other benefits provided to employees after they retire, such as pensions or health insurance.

FICA-OASDI

Federal Insurance Contributions Act - Old Age, Survivors, and Disability Insurance, the tax withholding that funds Social Security and Medicare.

Fair Labor Standards Act

United States federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards.