On April 30, year 2, Karlin Company issued $6,000,000 face amount of 10%, 10-year bonds payable, with interest payable each June 30 and December 31. The company received cash of $6,084,000, including the accrued interest from December 31, year 1.
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On April 30, year 2, Karlin Company issued $6,000,000 face amount of 10%, 10-year bonds payable, with interest payable each June 30 and December 31. The company received cash of $6,084,000, including the accrued interest from December 31, year 1. Karlin uses the straight-line method of amortizing any discount or premium over the remaining life of the bonds – 116 months.
a What was the amount of accrued interest received by Karlin on April 30, year 2, when the bonds were issued? (Do not assume the bonds were issued at par.)
b What was the amount of discount or premium on the bonds at issuance date?
(Indicate discount or premium.) $
c What amount of cash is paid to bondholders for interest during year 2?
d What is Karlin’s total interest expense for year 2 related to this bond issue?
e What is the carrying value of this bond issue as of December 31, year 2?
Shown below is the stockholders’ equity section of Pilot Communication’s balance sheet at December 31, 2011:
Common stock, $2 par value, 500,000 shares authorized,
300000 shares issued $ 600,000
Additional paid in capital: common stock 1,500,000
Total paid-in capital $2,100,000
Retained earnings 1,800,000
Total stockholders’ equity $3,900,000
In 2012, the following events occurred:
• Pilot Communication issued 2,000 shares of $2 par common stock as payment for legal services. Although Pilot’s stock is not traded on any exchange, the agreed-upon value of the legal services is $60,000.
• Pilot Communication issued 6,000 shares of 6% cumulative preferred stock, $100 par value, for $108 per share.
• The board of directors declared a dividend of $1 per share on the common stock.
• Pilot’s net income for 2001 was $600,000.
Complete in good form the stockholders’ equity section of a balance sheet prepared for Pilot Communication at December 31, 2012: