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