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 | * | $760,000 | = | $495,215 |
Interest (Annuity) [$760,000*6%*6/12] | 6.334566 | * | $22,800 | = | $144,428 |
Price of Bonds | $639,643 |
Solution 2:
Patey Pontoons | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
01-Jan-18 | Cash A/c Dr | $639,643 | |
Discount on Bond Payable | $120,357 | ||
To bonds payable | $760,000 | ||
(Being bond issued at Discount) |
Solution 3:
Bond Amortization Schedule | |||||
Date | Cash interest | Interest Expense | Discount amortization | Unamortized discount | Carrying value |
01-Jan-18 | $120,357 | $639,643 | |||
30-Jun-18 | $22,800 | $35,180 | $12,380 | $107,976 | $652,024 |
31-Dec-18 | $22,800 | $35,861 | $13,061 | $94,915 | $665,085 |
30-Jun-19 | $22,800 | $36,580 | $13,780 | $81,135 | $678,865 |
31-Dec-19 | $22,800 | $37,338 | $14,538 | $66,598 | $693,402 |
30-Jun-20 | $22,800 | $38,137 | $15,337 | $51,261 | $708,739 |
31-Dec-20 | $22,800 | $38,981 | $16,181 | $35,080 | $724,920 |
30-Jun-21 | $22,800 | $39,871 | $17,071 | $18,009 | $741,991 |
31-Dec-21 | $22,800 | $40,809 | $18,009 | $0 | $760,000 |
Solution 4:
Journal Entries | |||
Date | Particulars | Debit | Credit |
30-Jun-18 | Interest Expense Dr | $35,180 | |
To Discount on bond payable | $12,380 | ||
To Cash | $22,800 | ||
(To record Interest on June 30, 2018) |
Solution 5:
Bonds reported on December 31, 2018 = | 665085 |
Solution 6:
Interest expense to be reported in Income statement = | 71042 |
Solution 7:
Journal Entries | |||
Date | Particulars | Debit | Credit |
31-Dec-21 | Interest Expense Dr | $40,809 | |
To Discount on bond payable | $18,009 | ||
To Cash | $22,800 | ||
31-Dec-21 | Bond Payable Dr | $760,000 | |
To Cash | $760,000 |
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