Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1, at 97. Glover’s year-end is December 31.
(a) Were the bonds issued at a premium, a discount, or at par?
(b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?
(c) If the company uses the straight-line method of amortization, what is the amount of interest expense Glover Corporation will show for the year ended December 31?
(d) What is the carrying value of the bonds on December 31?