On October 1, Year 1, Seoma Co. issued 10%, $500,000 face amount, 5-year bonds maturing on January 1, Year 6, for $527,500. The interest is payable annually on January 1. To issue the bonds, Seoma paid legal and consulting fees of $15,300. Seoma amortizes any discount or premium on bonds using the effective interest method and debt issue costs using the straight-line method.
Questions:
1. Based on the facts stated above, enter in the designated cell the appropriate dollar amount. Round all amounts to the nearest dollar. If the amount is zero, enter a zero (0).
Carrying amount of Bonds payable on Seoma’s October 1, Year 1, balance sheet
2. Select from the option list provided, your answer.
What interest rate was greater on the date the bonds were issued?
3. Enter in the designated cell the appropriate dollar amount. Enter premium as a positive amount and discount as a negative amount. Round all amounts to the nearest dollar. If the amount is zero, enter a zero (0).
Premium (discount) on bonds payable recognized on the issuance date
4. Assuming that the total expense related to the bonds payable of $14,375 was recognized in Seoma’s Year 1 income statement, enter in the designated cell the appropriate dollar amount. Round all amounts to the nearest dollar. If the amount is zero, enter a zero (0).
Carrying amount of Bonds payable on Seoma’s December 31, Year 1 balance sheet