Question

Required information [The following information applies to the questions displayed below.) On January 1, 2021, Splash City issues $480,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 8%, the bonds will issue at $447,385 Required: 1. Complete the first three rows of an amortization table. (Round your intermediate and final answers to the nearest whole dollar) Date Interest Cash Paid Change in Carrying Expense Carrying Value Value 121 3021 1213121
can someone solve this for me? thks

Answer 1

Par value of bonds = $480,000

Semi annual interest payment = 480,000 x 7% x 6/12

= $16,800

Effective interest rate = 8%

Semi annual Effective interest rate = 4%

Issue price of bonds = $447,385

Discount on bonds payable = Par value of bonds - Issue price of bonds

= 480,000 - 447,385

= $32,615

Date	Cash paid	Interest expense	Change in carrying value	Carrying value
1/1/21				447,385
6/30/21	16,800	447,385 x 4% = 17,895	17,895 - 16,800 = 1,095	447,385 + 1,095 = 448,480
12/31/21	16,800	448,480 x 4% = 17,939	17,939 - 16,800 = 1,139	448,480 + 1,139 = 449,619

Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubt. Thanks.