The notes to the Community Charities financial statements reported the following data on December 31, 2017 (end of the fiscal year):
Note D-Long-Term Debt
7% bonds payable, due in 2023...................................................... $ 500,000
Less: Discount................................................................................... (26,032) .... $473,968
6½% notes payable; principal due in annual amounts of
$50,000 in 2021 through 2026................................................................................. 300,000
Community Charities amortizes bonds by the effective-interest method and pays all interest amounts at December 31.
Requirements
1. Answer the following questions about Community Charities's long-term liabilities:
a. What is the maturity value of the 7% bonds?
b. What is Community Charities's annual cash interest payment on the 7% bonds?
c. What is the carrying amount of the 7% bonds at December 31, 2017?
2. Prepare an amortization table through December 31, 2020, for the 7% bonds. The market interest rate on the bonds was 8%. Round all amounts to the nearest dollar. How much is Community Charities's interest expense on the 7% bonds for the year ended
December 31, 2020?
3. Show how Community Charities would report the 7% bonds payable and the 6½% notes payable at December 31, 2020.