Blue Manufacturing Company issued $300,000 of 7%, 5-year bonds for $288,000, on January 1, 2013. Interest is payable on January 1 of each year. Blue uses the straight-line method of amortization. The first interest payment is to be made on January 1, 2014.
Required:
a) Show the effects of the following events on the accounting equation.
Event 1. The issuance of the bonds.
Event 2. Accrual of interest at December 31, 2013.
Event 3. Amortization of discount at December 31, 2013.
Event 4. Payment of interest on January 1, 2014. 
b) What is the carrying value of the bond on January 1, 2014?
c) What is the amount of interest paid in (1) 2013? (2) 2014?
d) What is the amount of interest expense shown on the income statement in 2013?
Correct Answer:
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b) $300,000 - ($12,000 - $2,400) = $...View Answer
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