Reference no: EM132544375

Question i: Glover Industries received authorization on December 31, year 1, to issue $5,000,000 face value of 8%, 10-year bonds. The interest payment dates are June 30 and December 31. All the bonds were issued at par, plus accrued interest, April 1, Year 2. The bonds are callable by glover Industries at any time at 102.

1) Prepare the journal entry to record issuance of the bonds on April 1, Year 2.

2) Prepare the journal entry to record the first semiannual interest payment on the bonds at June 30, Year 2.

3) What is the amount of bond interest expense that appears in glover's Year 2 income statement relating to these bonds?

4) What is the amount of accrued bond interest expense that appears in glover's balance sheet at December 31, Year 2, with respect to these bonds?

Question ii: Brand Corporation issued $2,000,000 of 7.5%, six-year bonds dated March 1, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1 at 97. Brand's year-end is December 31. If required, round answers to the nearest whole amount.

(a) Were the bonds issued at a premium, at a discount, or at par?

(b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?

(c) If the company uses the straight-line method of amortization, what is the amount of interest expense Brand Corporation will show for the year ended December 31?

(d) What is the carrying value of the bonds on December 31?