Solution 1:
Chart Values are based on: | |||||
n= (4 Years*2) | 8 | Half years | |||
i= (11%/2) | 5.50% | Semi annual | |||
Cash Flow | Table Value | * | Amount | = | Present Value |
Principal | 0.651599 | * | $5,60,000 | = | $3,64,895 |
Interest (Annuity) [$560,000*10%*6/12] | 6.334566 | * | $28,000 | = | $1,77,368 |
Price of Bonds | $5,42,263 |
Solution 2:
Patey Pontoons | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
01-Jan-21 | Cash A/c Dr | $5,42,263 | |
Discount on Bond Payable | $17,737 | ||
To bonds payable | $5,60,000 | ||
(Being bond issued at Discount) |
Solution 3:
Bond Amortization Schedule | ||||
Date | Cash interest | Interest Expense | Discount amortization | Carrying value |
01-Jan-21 | $5,42,263 | |||
30-Jun-21 | $28,000 | $29,824 | $1,824 | $5,44,088 |
31-Dec-21 | $28,000 | $29,925 | $1,925 | $5,46,013 |
30-Jun-22 | $28,000 | $30,031 | $2,031 | $5,48,043 |
31-Dec-22 | $28,000 | $30,142 | $2,142 | $5,50,186 |
30-Jun-23 | $28,000 | $30,260 | $2,260 | $5,52,446 |
31-Dec-23 | $28,000 | $30,385 | $2,385 | $5,54,830 |
30-Jun-24 | $28,000 | $30,516 | $2,516 | $5,57,346 |
31-Dec-24 | $28,000 | $30,654 | $2,654 | $5,60,000 |
Solution 4:
Journal Entries | |||
Date | Particulars | Debit | Credit |
30-Jun-21 | Interest Expense Dr | $29,824 | |
To Discount on bond payable | $1,824 | ||
To Cash | $28,000 | ||
(To record Interest on June 30, 2021) |
Solution 5:
Bond reported in Balance Sheet Dec 31, 2021 = $546,013
Solution 6:
Interest Expense reported in Income statement = $29824 + $29925 = $59,749
Solution 7:
Journal Entries | |||
Date | Particulars | Debit | Credit |
31-Dec-24 | Interest Expense Dr | $30,654 | |
To Discount on bond payable | $2,654 | ||
To Cash | $28,000 | ||
31-Dec-24 | Bond Payable Dr | $5,60,000 | |
To Cash | $5,60,000 |
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