Please explain how to find the interest
expense and the discount amortized.
Homework Answers
Solution
| Schedule of Discount Amortization | ||||
| Straight-Line Method | ||||
| Year | Cash Paid | Interest expense | Discount Amortized | Carrying Amount of Bonds |
| Jan 1, 2020 | $ 1,658,860 | |||
| Jan 1, 2021 | $ 167,400 | $ 207,628 | $ 40,228 | $ 1,699,088 |
| Jan 1, 2022 | $ 167,400 | $ 207,628 | $ 40,228 | $ 1,739,316 |
| Jan 1, 2023 | $ 167,400 | $ 207,628 | $ 40,228 | $ 1,779,544 |
| Jan 1, 2024 | $ 167,400 | $ 207,628 | $ 40,228 | $ 1,819,772 |
| Jan 1, 2025 | $ 167,400 | $ 207,628 | $ 40,228 | $ 1,860,000 |
.
| Bond issue price | $ 1,658,860 |
| Face value | $ 1,860,000 |
| Discount on bonds payable | $ 201,140 |
| Number of Interest payments | 5 |
| Discount/ premium to be amortized per year | $ 40,228 |
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Please explain how to find the interest
expense and the discount amortized.
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Set up a schedule of interest expense and discount amortization
under the straight-line method. (Round answers to 0
decimal places, e.g. 38,548.)
Schedule of Discount Amortization
Straight-Line Method
Year
Cash
Paid
Interest
Expense
Discount
Amortized
Carrying
Amount of Bonds
Jan. 1, 2017
$
$
$
$
Jan. 1,...
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Exercise 14-07
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Set up a schedule of interest expense and discount amortization
under the straight-line method. (Round answers to 0
decimal places, e.g. 38,548.)
Schedule of Discount Amortization
Straight-Line Method
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Interest
Expense
Discount
Amortized
Carrying
Amount of Bonds
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Determine the effective-interest rate. (Round
answer to 0 decimal places, e.g. 18%.)
The effective-interest rate
%
Set up a schedule of interest expense and discount amortization
under the effective-interest method. (Round
intermediate calculations to 5 decimal places, e.g. 1.25124 and
final answer to 0 decimal places, e.g. 38,548.)...
Exercise 14-07
Pronghorn Company sells 8% bonds having a maturity value of
$2,000,000 for $1,848,366. The bonds are dated January 1, 2020, and
mature January 1, 2025. Interest is payable annually on January
1.
Determine the effective-interest rate. (Round
answer to 0 decimal places, e.g. 18%.)
The effective-interest rate
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Set up a schedule of interest expense and discount amortization
under the effective-interest method. (Round
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final answer to 0 decimal places,...
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