Homework Answers
| 1. | |||
| Calculation of discount on the bonds at issuance | |||
| Discount on bonds | Face value of bond - Issue price of bond | ||
| Discount on bonds | 290000-282750 | ||
| Discount on bonds | $7,250 | ||
| 2. | |||
| Bond amortized each year | 7250/20 | ||
| Bond amortized each year | $362.50 | ||
| Total discount amortized for 6 years | 362.50*6 | ||
| Total discount amortized for 6 years | $2,175.00 | ||
| Amortization of discount | $2,175.00 | ||
| 3. | |||
| Calculation of carrying value of bond is shown below | |||
| Issue price of bond | $282,750.00 | ||
| Add: Amortization of discount | $2,175.00 | ||
| Book value of bond as on 31/12/2024 | $284,925.00 | ||
| 4. | |||
| Journal entry to record bond retirement | |||
| General Journal | Debit | Credit | |
| Bonds payable | $290,000 | ||
| Loss on retirement of bonds (303050-284925) | $18,125 | ||
| Discount on bonds payable (7250-2175) | $5,075 | ||
| Cash | $303,050 | ||
| (To record bond retirement) | |||
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for $419,000. All interest is accounted for and paid through
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method is used to amortize any bond discount.
1. What is the amount of the discount on the bonds
at issuance?
2. How much amortization...
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