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Novastar Corporation - Balances

Novastar Corporation issued 2,000 of its $1,000, 10% ten-year bonds dated July 1, Year 1 on July 1, Year 1, at a time when the market paid 9% for bonds of similar risk. Interest is payable annually. The bonds were properly carried at $2,134,000 upon issue. On its December 31, Year 1 financial statements, Novastar Corporation would display the following balances:

Unamortized Accrued Interest Interest
Bonds Payable Premium Payable Expense
o $2,000,000 $126,060 $200,000 $192,060
o $2,000,000 $130,030 $100,000 $ 96,030
o $2,000,000 $141,940 $200,000 $192,060
o $2,000,000 $137,970 $100,000 $ 96,030

Solution Preview

Using the effective interest method, Interest expense for 6 months = 2,134,000 X 9%/2 = 96,030. The ...

Solution Summary

The following posting helps with problems involving a company's balances.

$2.19