PROBLEM THREE $400,000 4% bonds are issued at 97.67708575 for $390,708.34 when the market rate for...

Transcribed Image Text:

PROBLEM THREE $400,000 4% bonds are issued at 97.67708575 for $390,708.34 when the market rate for similar bonds is 5%. Regular interest payments are June 30th and December 31st each year. Complete the amortization schedule. June 30, 20x1 Dec. 31, 20x1 June 30, 20x2 Dec. 31, 20x2 June 30, 20x3 A Interest Payment Face x Face Interest x Time 400,000 x .04 x 6/12 8,000.00 8,000.00 Cash Discount on bond Bond payable To record the issuance Interest expense Discount on bond B Interest Interest expense Premium on bond Cash Expense CV x Market Interest x Time CV x .05 x 6/12 9,767.71 9,811.90 49,291.66 Amortization Difference A and B Cash To record the first interest payment and amortize the discount Balance Discount 1,767.71 7,523.95 1,811.90 5,712.05 To record the second interest payment and amortize the discount 9,291.66 390,708.34 +1,767.71 392,476.05 390,708.34 9,291.66 9,767.71 Carrying Value 9,811.90 + 1,811.90 394,287.95 400,000.00 1,767.71 8,000.00 1,811.90 8,000.00 PROBLEM THREE $400,000 4% bonds are issued at 97.67708575 for $390,708.34 when the market rate for similar bonds is 5%. Regular interest payments are June 30th and December 31st each year. Complete the amortization schedule. June 30, 20x1 Dec. 31, 20x1 June 30, 20x2 Dec. 31, 20x2 June 30, 20x3 A Interest Payment Face x Face Interest x Time 400,000 x .04 x 6/12 8,000.00 8,000.00 Cash Discount on bond Bond payable To record the issuance Interest expense Discount on bond B Interest Interest expense Premium on bond Cash Expense CV x Market Interest x Time CV x .05 x 6/12 9,767.71 9,811.90 49,291.66 Amortization Difference A and B Cash To record the first interest payment and amortize the discount Balance Discount 1,767.71 7,523.95 1,811.90 5,712.05 To record the second interest payment and amortize the discount 9,291.66 390,708.34 +1,767.71 392,476.05 390,708.34 9,291.66 9,767.71 Carrying Value 9,811.90 + 1,811.90 394,287.95 400,000.00 1,767.71 8,000.00 1,811.90 8,000.00

Answer rating: 100% (QA)

1 We review the amortization schedule The table shows the amortization sc... View the full answer