On January 1,2016,a Company Issues 3-Year Bonds with a Face

question 177

Essay

On January 1,2016,a company issues 3-year bonds with a face value of $200,000 and a stated interest rate of 8%.Because the market interest rate is higher than the stated interest rate,the company receives $194,000 for the bond.
Required:
Part a.Determine the amount of the discount that will be amortized during the year ending December 31,2016.
Part b.Prepare the journal entry to record the first interest payment on December 31,2016.

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Definitions:

Exponentiation

A mathematical operation, written as a^b, involving two numbers, the base (a) and the exponent (b), where the base is multiplied by itself the exponent number of times.

Division

The process of assigning or distributing something into separate parts or groups.

Equation Complexity

A measure of the difficulty or intricacy of a mathematical equation, often based on the number of operations or variables involved.

Exponential Functions

Mathematical functions characterized by an expression in which a constant base is raised to a variable exponent.