Identify and analyze the effect of the payment of interest

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Stacy Company issued five-year, 10% bonds with a face value of $10,000 on January 1, 2012. Interest is paid annually on December 31. The market of interest on this date is 12%, and Stacy Company receives proceeds of $9,279 on the bond insurance. (For Information only) 10-3) Assume the same set of facts for Stacy Company as in problem 10-2 except that the market rate of interest of January 1, 2012, is 8% and the proceeds from the bond issuance equal $10,799 1) Prepare a five-year table (similar to exhibit 10-5) to amortize the premium using the effective interest method. 2) What is the total interest expense over the life of the bond? Cash interest payment? Premium amortization? 3) Identify and analyze the effect of the payment of interest and the amortization of premium on December 31,2014 (the third year), and determine the balance sheet presentation of the bonds on that date.

Reference no: EM13260738

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