Question:
Refer to the bond details in Problem 14-3B.
Required
1. Compute the total bond interest expense over the bonds’ life.
2. Prepare an effective interest amortization table like the one in Exhibit 14B.2 for the bonds’ life.
3. Prepare the journal entries to record the first two interest payments.
Exhibit 14B.2
Problem 14-3B
Ripkin Company issues 9%, five-year bonds dated January 1, 2021, with a $320,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $332,988. Their annual market rate is 8% on the issue date.
Required
1. Calculate the total bond interest expense over the bonds’ life.
2. Prepare a straight-line amortization table like Exhibit 14.11 for the bonds’ life.
3. Prepare the journal entries to record the first two interest payments.
Exhibit 14.11
Transcribed Image Text:
EXHIBIT 14B.2 Bonds: $100,000 Par Value, Semiannual Interest Payments, Two-Year Life, Effective Interest 6% Semiannual Contract Rate, 4.9851% Semiannual Market Rate Amortization of Bond Premium (A) (B) (C) Cash (D) (E) Bond $103,600 Semiannual Interest Interest Premium Interest Unamortized Carrying Value $102,765 Paid Expense Amortization $101,888. Period-End Premium 6% x $100,000 4.9851% x Prior (E) (A) – (B) Prior (D) - (C) $100,967 (0) 12/31/2021 $100,000 + (D) Carrylng value - - $100,000 ----. (1) $3,600 $103,600 6/30/2022 $ 6,000 $ 5,165 $ 835 (2) 2,765 102,765 12/31/2022 6,000 5,123 12/31/21 6/30/22 12/31/22 877 1,888 101,888 (3) 6/30/2023 6,000 12/31/23 5,079 921 (4) 12/31/2023 967 100,967 6,000 5,033 967 Bonds Payable $24,000 $20,400 100,000 $3,600 12/31/2021 100,000 Column (A) is the par value ($100,000) multiplied by the semiannual contract rate (6%). Column (B) is the prior period's carrying value multiplied by the semiannual market rate (4.9851%). Column (C) is the difference between interest paid and bond interest expense, or [(A) – (B)]. 6/30/2022 12/31/2022 6/30/2023 12/31/2023 100,000 Column (D) is the prior period's unamortized premium less the current period's premium amortization. Column (E) is the par value plus unamortized premium, or [S100,000 + (D)]. 12/31/2023 6/30/23
