On December 31, 2005, Reese Co. is in financial difficulty and cannot pay a note due
that day. It is a $600,000 note with $60,000 accrued interest payable to Trear, Inc.
Trear agrees to accept from Reese equipment that has a fair value of $290,000, an
original cost of $480,000, and accumulated depreciation of $230,000. Trear also
forgives the accrued interest, extends the maturity date to December 31, 2008, reduces
the face amount of the note to $250,000, and reduces the interest rate to 6%, with
interest payable at the end of each year.
Reese should recognize a gain or loss on the transfer of the equipment of
A company issues $20,000,000, 7.8%, 20-year bonds to yield 8%
on January 1, 2007. Interest is paid on June 30 and December 31.
The proceeds from the bonds are $19,604,145. Using effective-
interest amortization, how much interest expense will be
recognized in 2007?
Limeway Company issues $5,000,000, 6%, 5-year bonds dated January 1, 2007 on
January 1, 2007. The bonds pay interest semiannually on June 30 and December 31. The
bonds are issued to yield 5%. What are the proceeds from the bond issue?