A company issued 10%, 5-year bonds with a par value of $2,000,000, on January 1. Interest is to be paid semiannually each June 30 and December 31. The bonds were sold at $2,162,290 based on an annual market rate of 8%. The company uses the effective interest method of amortization.(1) Prepare an amortization table for the first two semiannual payment periods using the format shown below.SemiannualInterestPeriodCashInterestPaidBondInterestExpensePremiumAmortizationUnamortizedPremiumCarryingValue??????????????????(2) Prepare the journal entry to record the first semiannual interest payment.
What will be an ideal response?
(1)
| Semiannual Interest Period | Cash Interest Paid | Bond Interest Expense | Premium Amortization | Unamortized Premium | Carrying Value |
| 06/30 | $100,000.00 | $86,491.60 | $13,508.40 | $148,781.60 | $2,148,781.60 |
| 12/31 | 100,000.00 | 85,951.26 | 14,048.74 | 134,732.86 | 2,134,732.86 |
Cash payment: $2,000,000 * 10% * 1/2 year = $100,000.00
Interest expense: $2,162,290 * 8% * 1/2 year = $86,491.60
Premium amortized: $100,000 - $86,491.60 = $13,508.40
Unamortized premium: ($2,162,290 - $2,000,000) - $13,508.40 = $148,781.60
Carrying value: $2,000,000 + $148,781.60 = $2,148,781.60
12/31
Cash payment: $2,000,000 * 10% * 1/2 year = $100,000.00
Interest expense: $2,148,781.60 * 8% * 1/2 year = $85,951.26
Premium amortized: $100,000 - $85,951.26 = $14,048.74
Unamortized premium: $148,781.60 - $14,048.74 = $134,732.86
Carrying value: $2,000,000 + $134,732.86 = $2,134,732.86
(2)
| 6/30 | Bond Interest Expense | 86,491.60 | ? |
| ? | Premium on Bonds Payable | 13,508.40 | ? |
| ? | Cash | ? | 100,000.00 |
You might also like to view...
In the United States, there is a cultural belief that what is true and good can be discovered and applied universally. The United States would likely score high on ______ in Trompenaars' dimensions of value orientations.
A. activation B. diffusion C. particularism D. universalism
What are the unfair labor practice provisions of the Taft-Hartley Act of 1947? Be sure to specify which apply to unions and which apply to management.
What will be an ideal response?
The government usually adjusts the exemptions and standard deductions amounts annually to account for inflation
Indicate whether the statement is true or false.
In the context of the data coding process, researchers can never analyze the actual answers of respondents in more detail if the:
A. omitted questions were also coded. B. responses were edited by the researchers. C. answers were initially coded into broad categories. D. coding process was prepared after data collection for open-ended questions. E. survey was conducted online.