Demo_For_Chapter_10_Solutions

# Demo_For_Chapter_10_Solutions - Demo Problem for Chapter 10...

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Demo Problem for Chapter 10 (Accounting for Bonds Payable) Demo Problem #1 To raise funds to build a new plant, Reed Company's management  issued bonds. The bond indenture specified the following: Par value of the bonds: \$100,000. Date of issue: February 1, 2003; due in 10 years on January 31,  2013. Interest rate: 12 percent per annum, payable 6 percent on each  July 31 and January 31. All the bonds were sold on February 1, 2003, at 106. The annual  accounting period for Reed Company ends on December 31.  Issued at 106% of par. So if par is 100,000, present value is  106,000. Issued at premium – so market rate is less than  12% Requirement 1: How much cash did Reed Company receive from the sale of the bonds  payable?  Sale price of the bonds \$ 106,000 100,000 + 6% Requirement 2: What was the amount of premium on the bonds payable? Over how many  months should it be amortized?

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## This homework help was uploaded on 02/20/2009 for the course AEM 221 taught by Professor Little,j. during the Fall '08 term at Cornell.

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Demo_For_Chapter_10_Solutions - Demo Problem for Chapter 10...

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