(4 points) On 01-01-15, J issued $9,000,000 of its 4%, 5-year term bonds dated 01-01-15. At...

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(4 points) On 01-01-15, J issued $9,000,000 of its 4%, 5-year term bonds dated 01-01-15. At...

(4 points) On 01-01-15, J issued $9,000,000 of its 4%, 5-year term bonds dated 01-01-15. At the time the bonds were issued, similar bonds paid 4.125%. In conjunction with issuing the bonds, on 01-01-15, J incurred and paid $75,000 of issuance costs. The bonds pay interest every July 1 and January 1. J uses the effective-interest method to amortize any bond discount or premium. J prepares AJEs only as of every December 31. Prepare (and submit to me) a complete amortization schedule for these bonds. The schedule should look like the ones in your text. You must use an excel spreadsheet. At a minimum, the values for your “Interest Expense” and “Carrying Amount of Bonds” columns should be based on formulas – not you simply type in an amount that you calculated by hand! Also, prepare the entries J should make on
1. 01-01-15
2. 07-01-15
3. 12-31-15
4. 01-01-16

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Answer 1

Answer #1

Face Value	$ 9,000,000.00
Coupon Rate (semiannual)	2%
Coupon Payment	$ 180,000.00
Period = 5 x2	10
Rate = 4.125%/2	2.06%
Present Value of Bond	$8,949,637.79
Bonds issued at discount

A	B	C	D	E
Periods	Interest Payment	Interest Expense = 2.06% x prev. year carrying Amt	Discount Amortization (C - B)	Discount Account Balance E -D	Bond Carrying Amount
1/1/15				$ 50,362.21	$ 8,874,637.79	see JE 1
7/1/15	$ 180,000.00	$183,039.40	$3,039.40	$ 47,322.81	$ 8,952,677.19
1/1/16	$ 180,000.00	$184,648.97	$4,648.97	$ 42,673.84	$ 8,957,326.16
7/1/16	$ 180,000.00	$184,744.85	$4,744.85	$ 37,928.99	$ 8,962,071.01
1/1/17	$ 180,000.00	$184,842.71	$4,842.71	$ 33,086.27	$ 8,966,913.73
7/1/17	$ 180,000.00	$184,942.60	$4,942.60	$ 28,143.68	$ 8,971,856.32
1/1/18	$ 180,000.00	$185,044.54	$5,044.54	$ 23,099.14	$ 8,976,900.86
7/1/18	$ 180,000.00	$185,148.58	$5,148.58	$ 17,950.56	$ 8,982,049.44
1/1/19	$ 180,000.00	$185,254.77	$5,254.77	$ 12,695.79	$ 8,987,304.21
7/1/19	$ 180,000.00	$185,363.15	$5,363.15	$ 7,332.64	$ 8,992,667.36
1/1/20	$ 180,000.00	$185,473.76	$7,332.64	$ (0.00)	$ 9,000,000.00
Total			$50,362.21

Date	General Journal	Debit	Credit
1/1/15	Cash (balancing)	$ 8,874,637.79
	Bonds issuance Expense	$ 75,000.00
	Discount on Bonds payable	$ 50,362.21
	Bonds Payable		$ 9,000,000.00

7/1/15	Bond interest expense	$183,039.40
	Discount on Bonds Payable		$3,039.40
	Cash		$ 180,000.00

12/31/15	Bond interest expense	$184,648.97
	Discount on Bonds Payable		$4,648.97
	Interest Payable		$ 180,000.00

1/1/16	Interest Payable	$ 180,000.00
	Cash		$ 180,000.00

9000000 =4%/2 7 Face Value 8 Coupon Rate (semiannual) 9 Coupon Payment 10 Period = 5 x2 11 Rate = 4.125%/2 12 Present Value o

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