Question

Exercise 10-14 Tarawa Limited issued $1,340,000 of 10-year, 5% bonds on January 1, 2018, when the market interest rate was 6%. Tarawa received $1,240,326 when the bonds were issued. Interest is payable semi- annually on July 1 and January 1. Tarawa has a December 31 year end. Your answer is partially correct. Try again. Record the issue of the bonds on January 1. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 Cash 1240326 T Bonds Payable 99674 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Record the payment of interest on July 1. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 1 Interest Payable 33500 Cash IT 33500 SHOW LIST OF ACCOUNTS LINK TO TEXT

Answer 1

	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-18	Cash	$12,40,326
		Bonds Payable		$12,40,326
	01-Jul-18	Interest expenses	$37,210
		Cash		$33,500
		Bond Payable		$3,710
	31-Dec-18	Interest expenses	$37,321
		Interest payable		$33,500
		Bond Payable		$3,821
Table values are based on:
n=	20
i=	3.0%
Cash Flow	Table Value	Amount	Present Value
Interest	14.87747	$33,500	$4,98,395
Principal	0.55368	$13,40,000	$7,41,931
Price of Bonds as on Jan 1,2018			$12,40,326
Present value of Bond after 1 year
n=	18
i=	3.0%
Cash Flow	Table Value	Amount	Present Value
Interest	13.75351	$33,500	$4,60,743
Principal	0.58739	$13,40,000	$7,87,103
Price of Bonds as on Jan 1,2019			$12,47,845
Difference between price			$7,519
Total discount amortization			$7,519
Difference			$0