When interest-bearing bonds are issued at a discount, the interest expense for the period is the...
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When interest-bearing bonds are issued at a discount, the interest expense for the period is the amount of interest payment for the period plus the discount amortization for the period. Under the effective interest rate method, a constant (or effective) rate of interest on the bond book (or carrying) value is allocated to the period. Information: On December 31, 2021, Brannigan Co issued $1,000,000 of 8 percent bonds, due in five years with interest payable annually on December 31. The market rate of interest is 9 percent. Assume the bond was issued at $961,103. Required: 1. Complete an amortization table for each of the five annual periods. 2. Prepare the journal entry necessary to (a) recognize the interest expense on December 31, 2022 and 2023 and (b) record the repayment of the loan principal on December 31, 2026. When interest-bearing bonds are issued at a discount, the interest expense for the period is the amount of interest payment for the period plus the discount amortization for the period. Under the effective interest rate method, a constant (or effective) rate of interest on the bond book (or carrying) value is allocated to the period. Information: On December 31, 2021, Brannigan Co issued $1,000,000 of 8 percent bonds, due in five years with interest payable annually on December 31. The market rate of interest is 9 percent. Assume the bond was issued at $961,103. Required: 1. Complete an amortization table for each of the five annual periods. 2. Prepare the journal entry necessary to (a) recognize the interest expense on December 31, 2022 and 2023 and (b) record the repayment of the loan principal on December 31, 2026.
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To complete the amortization table for each of the five annual periods and prepare the necessary journal entries we need to calculate the interest exp... View the full answer
Related Book For
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
Posted Date:
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