The comparative balance sheet of Posner Company, for 2011 and the preceeding year ended December 31, 2010 are:
Cash $53,000 50,000
Accts Rec 37,000 48,000
Inventories 108,500 100,000
Investments ……….. 70,000
Equipment 573,200 450,000
Acc Depreciation (142,000) (176,000)
Accounts Payable $62,500 $43,800
Bonds Payable, due 2011 …….. 100,000
Common Stock, $10 par 325,000 285,000
Paid-in Capital in excess of par
common stock 80,000 55,000
Retained earnings 162,200 58,200
The income statement for the current year is as follows:
Cost of Merchandise sold 340,000
Gross Profit $285,700
Depreciation expense $26,000
Other operating expense 68,000
Income from operations 94,000
Gain on sale of investment $4,000
Interest expense 6,000 (2,000)
Income before income tax $189,700
Income tax 60,700
Net income $129,000
On September 30,2010 Lanter Company issued 0,000 worth of 5-year, 9% bonds when the market rate was 8%. Proceeds were $104,000. The interest is paid annually on September 30.
A. What is the annual interest expense?
B. What is the amount of interest expense on the date of the first interest payment?
C. What is the carrying value at the end of the first year?
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