# How much actual interest must Griz pay to bondholders (creditors) in 2017?… 1 answer below »

On January 1, 2017, Griz Industries sold ten-year term bonds with a face value of \$1,000,000. The bonds carried a coupon rate of 6%, with interest payable annually. The market rate of interest on the date the bonds were issued was 5%. The proceeds that were received by Griz upon issuance of the bonds were \$1,025,000 (Note: fictional amount for ease of your calculations – not based on actual PV calculations). Based on these facts, answer the following questions (show your calculations to receive credit):
How much actual interest must Griz pay to bondholders (creditors) in 2017? How much will Griz recognize as interest expense in 2017 (use the effective interest method)? What is the amount of bond premium amortized in 2017 (use the effective interest method)? What is the book value (carrying value) of the bonds as of January 1, 2018, following payment of the interest for 2017?
Problem 2. ACCOUNTING FOR FIXED ASSET IMPAIRMENTS
The following information for Gator Company is provided:
-A piece of custom-made equipment was purchased on January 1, 2014 for \$1,500,000.
-The equipment is being depreciated straight-line over a 10 year useful life with no salvage value.
-On December 31, 2017, the asset is evaluated for possible impairment. Assume all appropriate depreciation has already been recorded to that date.
-On December 31, 2017, it is estimated that the (undiscounted) future net cash flows to be generated by the asset will be \$875,000.
-The present value of these future cash flows is \$800,000.
-On December 31, 2017, the fair market value of the asset (if sold) is \$890,000.