Erik Food Supply Company issued $100,000 of face amount of 4-year bonds on January 1, 20X1. The bonds were issued at 98, and bear interest at a stated rate of 8% per annum, payable semiannually.
| Erik Food Supply Company issued $100,000 of face amount of 4-year bonds on January 1, 20X1. The bonds were issued at 98, and bear interest at a stated rate of 8% per annum, payable semiannually. The discount is amortized by the straight-line method. | ||
| (a) | Prepare the journal entry to record the initial issuance on January, 20X1. | |
| (b) | Prepare the journal entry that Erik would record on each interest date. | |
| (c) | Prepare the journal entry that Erik would record at maturity of the bonds. | |
| (d) | How much cash flowed “in” and “out” on this bond issue, and how does the difference compare to total interest expense that was recognized? | |
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