Question

Zappits Autoparts Inc, issued $180,000 of 7%, 10-year bonds at a price of 91 on January 31, 2017. The market interest rate at the date of issuance was 10%, and the standard bonds pay interest semi-annually 1. Prepare an effective interest amortization table for the bonds through the first three interest payments 2. Record Zappits' issuance of the bonds on January 31, 2017 and payment of the first semi-annual interest amount and amortization of the bonds on July 31, 2017 Explanations are not required 1. Prepare an effective interest amortization table for the bonds through the first three interest payments (Round your answers to the nearest whole dollar.) Zappits Autoparts Amortization Table Interest Payment (3.5% of Maturity Value) Interest Expense (5% of Preceding Bond Carrying Amount) Bond Discount Amortization (B-A) Bond Discount Account Balance (Preceding D-C) Bond Carrying Amount ($180,000 -D) Semi-annual Interest Date Jan 31, 2017 July 31, 2017 Jan 31, 2018 July 31, 2018

Answer 1

1)
Semi-annual	Interest	Interest	Bond	Bond	Bond
interest rate	Payment	Expense	Discount	Discount	Carrying
	3.5% of MV	5.0% of	Amortization	Account	Amount
		Carrying		Balance
		amount
31-Jan-17				$ 16,200.00	$         163,800.00
31-Jul-17	$        6,300.00	$       8,190.00	$     1,890.00	$ 14,310.00	$         161,910.00
31-Jan-18	$        6,300.00	$       8,095.50	$     1,795.50	$ 12,514.50	$         160,114.50
31-Jul-18	$        6,300.00	$       8,005.73	$     1,705.73	$ 10,808.78	$         158,408.78
2)	Account Title	Debit	Credit
31-Jan-17	Cash (180,000 *91%)	$   163,800.00
	Discount on bonds payable (180000-163800)	$     16,200.00
	Bonds payable		$ 180,000.00
3)	Account Title	Debit	Credit
31-Jul-17	Interest expense (163800*5%)	$       8,190.00
	Discount on bonds payable (8190-6300)		$     1,890.00
	Cash (180000*3.5%)		$     6,300.00