page 1

page 2

Question # 5: (20 points) The amortization and interest of 5-year bonds by ABC Corporation on January 1, 2020, and the subsequent interest payments and charges. The company's year-end is December 31, and financial statements are prepared once yearly. Date Balance Interest Payment. Interest Expense Debit Interest Expense Amount Unamortized Credit Bond Discount Credit Cash $3,851 $4,500 $4,500 Jan 1, 2020 Jun 30, 2020 Dec 31, 2020 Jun 30, 2021 Dec 31, 2021 Jun 30, 2022 Dec 31, 2022 Jun 30, 2023 Dec 31, 2023 Jun 30, 2024 Dec 31, 2024 Totals $4,500 $4,500 $4,500 $4,500 $4,500 $4,807 $4,822 $4,839 $4,856 $4,874 $4,892 $307 $322 $339 $356 $374 $392 $412 $433 $454 $3,544 $3,222 $2,883 $2,527 $2,153 $1,761 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $ 96,149 $ 96,456 $ 96,778 $ 97,117 $ 97,473 $ 97,847 $ 98,239 $ 98,651 $ 99,084 $ 99,538 $100,000 $4.912 $1,349 $4,500 $ 916 $4,933 $4,954 $ 462 $4,500 $4,500 $45,000 $4.962 $462 $ 0 $48,851 $3,851 Required: (a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule. (b) Determine the stated interest rate and the effective interest rate. (c) On the basis of the schedule, prepare the journal entry to record the issuance of the bonds on January 1, 2020. (d) On the basis of the schedule, prepare the journal entry or entries to reflect the bond transactions and accruals for 2020. (Interest is paid January 1 and July 1.) (e) On the basis of the schedule, prepare the journal entry or entries to reflect the bond transactions and accruals for 2023. The Corporation does not use reversing entries. (f) What is the total amount of interest payed to bondholders? (8) What is the total amount of interest expense for the 5 years? (h) What is the carrying amount (BV) for the bond at July 1, 2022