COMPLETING A BOND AMORTIZATION TABLE (EFFECTIVE INTEREST RATE METHOD)

Cagney Company sold $200,000 of bonds on June 30, 2010. A portion of the amortization table appears below.

Period Cash Payment

(Credit)

Interest Expense

(Debit)

Discount on Bonds Payable

(Credit)

Discount on Bonds Payable Balance Carrying Value 12/31/11 $9,000 $9,277 $277 $2,340 $197,660 6/30/12 9,000 9,290 290 2,050 197,950 12/31/12 ? ? ? ? ?

Required:

. Indicate the stated interest rate on these bonds.

. Calculate the effective annual interest rate on these bonds (rounded to the nearest 0.1 percent).

. Determine the interest expense and discount amortization for the interest period ending December 31, 2012.
. Determine the liability balance after the interest payment is recorded on December 31, 2012.
Exercise