E10-10 (Algo) Preparing a Bond Amortization Schedule for a Bond Issued at a Discount and Determining Reported Amounts LO10-4

On January 1 of this year, Ikuta Company issued a bond with a face value of $200,000 and a coupon rate of 5 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 6 percent. Ikuta uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answers to whole dollars.)

Required: 1. Complete a bond amortization schedule for all three years of the bond's life. Answer is complete but not entirely correct. Date Jan. 01, Year 1 Dec. 31, Year 1 Dec. 31, Year 2 Dec. 31, Year 3 Cash Interest Book Value Amortization Interest Expense of Bond $ 195,675 X $ 10,000 $ 11,740 X $ 1,740 X $ 197,415 X $ 10,000 $ 11,845 $ 1,845 $ 199,260 $ 10,000 $ 11,956 X $ 1,956 X $ 201,216 X 2. What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2? X Answer is complete but not entirely correct. December 31 Year 1 Year 2 Interest expense $ 11,740 X $ 11,845 X Bonds payable $ 197,415 X $ 199,260 X