Question

Required information [The following information applies to the questions displayed below.] On January 1, 2021, White Water issues $530,000 of 6% bonds, due in 20 years, with interest payable annually on December 31 each year. Assuming the market interest rate on the issue date is 7%, the bonds will issue at $473,852. Required: 1. Complete the first three rows of an amortization schedule. (Round your final answers to the nearest whole dollar.) Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 12/31/2021 12/31/2022

Answer 1

Requirement 1:

Date	Cash Paid	Interest Expense	Increase in Carrying Value	Carrying Value
1/1/2021				$473,852
12/31/2021	$31,800	$33,170	$1,370	$475,222
12/31/2022	$31,800	$33,266	$1,466	$476,687

Cash paid = $530,000 face value x 6% = $31,800

Interest expense = Preceding carrying value x 7% market rate

Increase in carrying value = Interest expense - Cash paid

Carrying value = Preceding carrying value + Increase in carrying value

Requirement 2:

Date	Account title and explanation	Debit	Credit
January 01,2012	Cash	$473,852
	Discount on bonds payable	$56,148
	Bonds payable		$530,000
	[To record issuance of bonds]
December 31,2021	Interest expense	$33,170
	Discount on bonds payable		$1,370
	Cash		$31,800
	[To record the first annual interest payment]
December 31,2021	Interest expense	$33,266
	Discount on bonds payable		$1,466
	Cash		$31,800
	[To record the first annual interest payment]