AP Recording Bond Issuance and Interest Payment with Explanation of Bond Premium and Discussion of Management Strategy P
On March year Carter Corporation issued $ in bonds that mature in years. The bonds have a coupon rate of percent and pay interest on March and September When the bonds were sold, the market rate of interest was percent. Carter uses the effectiveinterest method to amortize bond discount or premium. By December year the market interest rate had increased to percent.
Required:
Record the issuance of the bond on March year
Compute the present value of the difference between the interest paid each six months $ and the interest demanded by the market $ million $ Use the market rate of interest and the year life of the bond in your present value computation. What does this amount represent? Explain.
Record the payment of interest on September year
Record the adjusting entry for accrued interest on December year
Why does interest expense change each year when the effectiveinterest method is used?
