Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

Exercise 10

Recording Bonds Issued at a Discount
Lewis Company sold $500,000 of bonds at 97 on an interest payment date. Assuming the bonds will be retired in 10 years and interest is paid annually, calculate the amount of cash that will be received and paid by Lewis in the first year, as well as the interest expense that will be recognized in that year. The bonds carry a stated interest rate of 5 percent.