A company issued 10%, 10-year bonds with a par value of $1,000,000 on January 1, at a selling price of $885,295 when the annual market interest rate was 12%. The company uses the effective interest amortization method. Interest is paid semiannually each June 30 and December 31.(1) Prepare an amortization table for the first two payment periods using the format shown below:SemiannualCashBond???InterestInterestInterestDiscountUnamortizedCarryingPeriodPaidExpenseAmortizationDiscountValue??????????????????(2) Prepare the journal entry to record the first semiannual interest payment.
What will be an ideal response?
(1)
| Semi- annual | Cash | Bond | ? | ? | ? |
| Interest | Interest | Interest | Discount | Unamortized | Carrying |
| Period | Paid | Expense | Amortization | Discount | Value |
| 6/30 | $50,000.00 | $53,117.70 | $3,117.70 | $111,587.30 | $888,412.70 |
| 12/31 | 50,000.00 | 53,304.76 | 3,304.76 | 108,282.54 | 891,717.46 |
Cash payment: $1,000,000 * 10% * ½ year = $50,000.00
Interest expense: $885,295 * 12% * ½ year = $53,117.70
Discount amortized: $53,117.70 ? $50,000.00 = $3,117.70
Unamortized discount: ($1,000,000 ? $885,295) ? $3,117.70 = $111,587.30
Carrying value: $1,000,000 ? $111,587.30 = $888,412.70
12/31/:
Cash payment: $1,000,000 * 10% * ½ year = $50,000.00
Interest expense: $888,412.70 * 12% * ½ year = $53,304.76
Discount amortized: $53,304.76 ? $50,000.00 = $3,304.76
Unamortized discount: $111,587.30 ? $3,304.76 = $108,282.54
Carrying value: $1,000,000 ? $108,282.54 = $891,717.46
(2)
| 6/30 | Bond Interest Expense | 53,117.70 | ? |
| ? | Discount on Bonds Payable | ? | 3,117.70 |
| ? | Cash | ? | 50,000.00 |
You might also like to view...
Identify two key factors that define a founder's ability to build a coalition.
What will be an ideal response?
Direct materials cost is a fixed cost because it always occurs in a production process
Indicate whether the statement is true or false
Which of the following is NOT one of the HR competencies that will be most critical as identified by a recent SHRM survey of HR professionals?
A. Business acumen B. Organizational leadership and navigation C. Managing upward D. Relationship management E. Communication
In which module of the ERP system is most of the product differentiation, including industry specific functionality, incorporated?
a. manufacturing b. human resources management (HRM) c. supply chain management (SCM) d. finance and accounting