On January 1, 2014, Farmer issued $80,000 of serial bonds that paid 7% interest annually. Each December 31, $16,000 of the bonds comes due. The bonds were issued for $75,200.
Required:
a.Using the bonds outstanding method, compute the total amount of interest expense for 2017.
b.Assume that on January 1, 2016, the issue coming due on December 31, 2018, was redeemed at 101. Compute the gain or loss that should be recognized on the bond redemption.

Question

On January 1, 2014, Farmer issued $80,000 of serial bonds that paid 7% interest annually. Each December 31, $16,000 of the bonds comes due. The bonds were issued for $75,200.
Required: 
a.Using the bonds outstanding method, compute the total amount of interest expense for 2017.
b.Assume that on January 1, 2016, the issue coming due on December 31, 2018, was redeemed at 101. Compute the gain or loss that should be recognized on the bond redemption.

Quizplus · Accepted Answer

The Answer of On January 1, 2014, Farmer issued $80,000 of serial bonds that paid 7% interest annually. Each December 31, $16,000 of the bonds comes due. The bonds were issued for $75,200.
Required: 
a.Using the bonds outstanding method, compute the total amount of interest expense for 2017.
b.Assume that on January 1, 2016, the issue coming due on December 31, 2018, was redeemed at 101. Compute the gain or loss that should be recognized on the bond redemption.

On January 1, 2014, Farmer Issued $80,000 of Serial Bonds