Renfro Company issued $500,000 of 8%, 10-year bonds at $534,960. interest is pai
ID: 2462056 • Letter: R
Question
Renfro Company issued $500,000 of 8%, 10-year bonds at $534,960. interest is paid annually, and the effective method is used for amortization. Assume the market rate for similar investments is 7%. The bonds are issued on the date of the bonds. What amount was received for the bonds? How much interest is paid each interest period? What is the premium amortization for the first interest period? How much bond interest expense is recorded on the first interest date? What is the carrying values of the bonds after the first interest date?Explanation / Answer
Solution:
a. Amount receved on bonds = 534,960 b. Interest paid for each period = 8 % * $ 500,000 40,000 c. Premium amortization Premimum on Bonds issued = $ 534,960 - $ 500,000 34,960 Interest payment 40,000