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Accounting for Long-Term Liabilities for Rubotics Corporation

Rubotics Corporation issued $1,000,000 of 6.5%, 8-year bonds dated June 30, 20X5, with semiannual interest payments on December 31 and June 30. The bonds were issued on June 30, 20X5, for $1,033,750, Rubotics Corporation's year-end is December 31.

a) Were the bonds issued at a premium, a discount: or at par?
b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?
c) If the company uses the straight-line method of amortization, what is the amount of interest expense Rubotics Corporation will show
for the year ended December31, 20X5 (round to the nearest dollar)
d) What is the carrying value of the bonds on December 31, 20X5?

Solution Preview

Rubotics Corporation issued $1,000,000 of 6.5%, 8-year bonds dated June 30, 20X5, with semiannual interest payments on December 31 and June 30.

The bonds were issued on June 30, 20X5, for $1,033,750, Rubotics Corporation's year-end is December 31.

a) Were the bonds issued at a premium, a discount: or at par?

The bonds are issued at a premium because the issued price of $1,033,750 is ...

Solution Summary

This solution is comprised of a detailed explanation to answer the questions regarding the bonds issued by Rubotics Corporation.

$2.19