Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 4

Compute bond proceeds, amortizing premium by interest method, and interest expense
Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $35,000,000 of five-year, 12% bonds at a market (effective) interest rate of 10%, with interest payable semiannually. Compute the following, presenting figures used in your computations:
a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibits 8 and 10. Round to the nearest dollar.
b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar.
c. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar.
d. The amount of the bond interest expense for the first year.