Return to the facts of A13-10. The bond is now issued on 1 August 20X1.

Data From A13-10

The following partial amortization table was developed for a 5.4%, $800,000 5-year bond that pays interest each 30 September and 31 March. The table uses an effective interest rate of 5%. The bond was dated 1 April 20X1.

Required:
1. Calculate the issuance proceeds of the bond and accrued interest.
2. Record all entries associated with the bond for 20X1 and 20X2.
3. Calculate interest expense for 20X1 and determine the net balance of bonds payable as of 31 December 20X1.

Transcribed Image Text:

Interest Period Opening 1 (30 Sept. 20X1) 2 3 4 5 6 7 Amortization Schedule, Effective Interest Method Balance Unamortized Premium Cash Interest $21,600 21,600 21,600 21,600 21,600 21,600 21,600 Interest Expense $20,350 20,319 20,287 20,254 20,220 20,186 20,150 Premium Amortization $1,250 1,281 1,313 1,346 1,380 1,414 1,450 $14,003 12,753 11,472 10,159 8,813 7,433 6,019 4,569 Carrying Amount of Bonds $814,003 812,753 811,472 810,159 808,813 807,433 806,019 804,569