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

question 13

Essay

On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds.
Required:
Part a.Determine the interest expense,the cash payment for interest,and the amount of the premium 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:

Indispensable Paper

Essential documents or records that are crucial for the verification, operation, or evidence in legal or financial transactions.

Fixtures

Items that are originally personal property but become real property when attached to land or a building in a permanent manner.

Documents of Title

Legal documents that prove ownership of an asset, such as a bill of lading or warehouse receipt.

Accounts

Records summarizing financial transactions, reflecting the financial condition and operations of an entity.