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Accounting for and Presentation of liabilites

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On January 1, 2007, Simon Inc issued $500,000 of 9%, 10 year bonds at 101. Interest is payable every June 30 and December 31. Premium is amortized on a straight-line basis.

a. Was the market interest rate on Jan. 1, 2007 equal to, more than, or less than the stated interest rate of the bonds? explain your answer.

b. how much interest will be paid on these bonds during 2007. Explain or show how you got the answer.

c. How much interest expense will Simon inc. report in its 2007 income statement with respect to these bonds?

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The solution provide an example for accounting for and presentation of liabilities.

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A - Bonds are usually issued at premium when the market rate is less than the coupon rate. The company can be financially strong and commands a premium for its ...

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