Week 4 With the general data provided the following Financial Statements for ABC Company

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Week #4With the general data provided the following Financial Statements for ABC Company:

On January 1, 2013, ABC Company purchased a 10% bond having a maturity value of $600,000, for $647,912.52. The bond provides the bondholder with an 8% yield.
The bond is dated January 1, 2013 and mature January 1, 2018, with interest receivable December 31, each year.
The company uses the effective-interest method to allocate unamortized discount or premium.

Date

Interest paid
$600,000 x 10%

Effective Interest
Interest rate

1/1/2013
1/1/2014
1/1/2015
1/1/2016
1/1/2017
1/1/2018

60,000.00
60,000.00
60,000.00
60,000.00
60,000.00
60,000.00

0%
0%
0%
0%
0%

1-Jan-13 Dr. Bond
Cr. Cash

Interest
Expense

Amortization
of premium

-

Bond
carrying amount

(60,000.00)
(120,000.00)
(180,000.00)
(240,000.00)
(300,000.00)

60,000.00
60,000.00
60,000.00
60,000.00
60,000.00

-

31-Dec-13 Dr. Cash
Cr. Interest Revenue

-

31-Dec-13 Dr. Interest revenue
Cr. Bond

-

-

On January 1, 2013, ABC Company signed a 6-year, noncancelable lease for a Truck. The terms of the lease called for ABC Company to make annual payments of $10,000
at the beginning of each year, starting January 1, 2013. The truck has an estimated useful life of 7 years and zero residual value.
The truck reverts to the lessor at the end of the lease term. ABC Company uses the straight-line method of depreciation for all of its assets.
ABC Company's incremental borrowing rate is 9%, and the lessors implicit rate is unknown.