On January 1, 2005, Wolf Corp. issued its 10 % bonds in the face amount of $ 1,000,000, which mature on January 1, 2015. The bonds were issued for $ 1,135,000 to yield 8 %, resulting in bond premium of $ 135,000. Wolf uses the effective interest method of amortizing bond premium. Interest is payable annually on December 31. At December 31, 2005, Wolf ' s adjusted unamortized bond premium should be
Question 9
Earl was engaged by Farm Corp. to perform consulting services. Earl ' s compensation for these services consisted of 1,000 shares of Farm ' s $ 10 par value common stock, to be issued to Earl on completion of Earl ' s services. On the execution date of Earl ' s employment contract, Farm ' s stock had a market value of $ 40 per share. Six months later, when Earl ' s services were completed and the stock issued, the stock ' s market value was $ 50 per share. Farm ' s management estimated that Earl ' s services were worth $ 100,000 in cost savings to the company. As a result of this transaction, additional paid-in capital should increase by
Question 10
During 2005, Eddy Corp. incurred the following costs in connection with the issuance of bonds: What amount should be recorded as a deferred charge to be amortized over the term of the bonds?
Question 11