Question

The fiscal year ends December 31 for Lake Hamilton Development. To provide funding for its Moonlight Bay project, LHD issued 3% bonds with a face amount of $580,000 on November 1, 2009. The bonds sold for $515,050, a price to yield the market rate of 4%. The bonds mature October 31, 2023 (15 years). Interest is paid semiannually on April 30 and October 31.

Requirement 1: What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2009? (Round your answer to the nearest dollar amount.)

Requirement 2: What amount related to the bonds will LHD report in its balance sheet at December 31, 2009?

Requirement 3: What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2010? (Round your answer to the nearest dollar amount.)

Requirement 4: What amount related to the bonds will LHD report in its balance sheet at December 31, 2010?

Answer 1

Answer Answer Given details Page :ol issued bonds = 30/ face amount = $580,000. bonds sold - 515,050. mouket rate = 4000 Required © Interest Expense related to bond to be reported in income statement for year ending December 31, 2009 e interest poupable + Discount Amortized = $ 580,000 X 3•4. x/12 + $64950115 x 2112) = 2900 + ( 4330 * 0.166664) 2900 + 421.66667 = 36a1.66 = $3622 Required © amortized on December 31, = Discount 2009 = $ 792

page : 62 Amount related to bonds will LHD sreport on december 31, 2009 balance sheet a $ 515050+ $ 792 . = 515792. to Interest Expense to be reported in income Statement for year ended december 31, 2000 $ 580,000x 34%. +(64950/15) = $ 17400 + 4330 = $130. Required 4 amount related to bonds Amount related to bonds will LHD report on december 31, 2020 balance sheet 7. Cortying value on Dec 31, 2019f Discount amortized - ¢ 515-772 + $ 4330 $ 520102 Note that company is assumed that it is using straight line method for discount amortization w