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 | 0.65160 | * | $5,40,000 | = | $3,51,864 |
Interest (Annuity) [$540,000*8%*6/12] | 6.33457 | * | $21,600 | = | $1,36,827 |
Price of Bonds | $4,88,691 |
Solution 2: | |||
Patey Pontoons | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
01-Jan-21 | Cash A/c Dr | $4,88,691 | |
Discount on Bond Payable | $51,309 | ||
To bonds payable | $5,40,000 | ||
(Being bond issued at Discount) |
Solution 3: | |||||
Bond Amortization Schedule | |||||
Date | Cash interest | Interest Expense | Discount amortization | Unamortized discount | Carrying value |
01-Jan-21 | $51,309 | $4,88,691 | |||
30-Jun-21 | $21,600 | $26,878 | $5,278 | $46,031 | $4,93,969 |
31-Dec-21 | $21,600 | $27,168 | $5,568 | $40,463 | $4,99,537 |
30-Jun-22 | $21,600 | $27,475 | $5,875 | $34,588 | $5,05,412 |
31-Dec-22 | $21,600 | $27,798 | $6,198 | $28,391 | $5,11,609 |
30-Jun-23 | $21,600 | $28,139 | $6,539 | $21,852 | $5,18,148 |
31-Dec-23 | $21,600 | $28,498 | $6,898 | $14,954 | $5,25,046 |
30-Jun-24 | $21,600 | $28,878 | $7,278 | $7,677 | $5,32,323 |
31-Dec-24 | $21,600 | $29,277 | $7,677 | $0 | $5,40,000 |
Solution 4: | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
30-Jun-21 | Interest Expense Dr | $26,878 | |
To Discount on bond payable | $5,278 | ||
To Cash | $21,600 | ||
(To record Interest on June 30, 2021) | |||
Solution 5: | |||
Bonds reported on December 31, 2021 = | 499537 | ||
Solution 6: | |||
Interest expense to be reported in Income statement = | 54046 | ||
Solution 7: | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
31-Dec-24 | Interest Expense Dr | $29,277 | |
To Discount on bond payable | $7,677 | ||
To Cash | $21,600 | ||
31-Dec-24 | Bond Payable Dr | $5,40,000 | |
To Cash | $5,40,000 |
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