Question

E10-10 (Algo) Preparing a Bond Amortization Schedule for a Bond Issued at a Discount and Determining Reported Amounts LO10-4 On January 1 of this year, Ikuta Company issued a bond with a face value of $190,000 and a coupon rate of 5 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 6 percent. Ikuta uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answers to whole dollars.) Required: 1. Complete a bond amortization schedule for all three years of the bond's life. Date Cash Interest Interest Expense Amortization Book Value of Bond Jan. 01, Year 1 Dec. 31, Year 1 Dec. 31, Year 2 Dec. 31, Year 3 2. What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2? Year 1 Year 2 December 31 Interest expense Bonds payable

Answer 1

В2 А C D E F G Н 1 cash interest interest expense amortization book value of bond date 2 1 $184,921 jan 01, year 1 3 $ 9,500 $ 9,500 $9,500 $ 11,095 $ 11,191 $11,292 $ 1,595 $1,691 $1,792 $ 186,517 dec 31, year 1 4 $188,208 dec 31, year 2 5 $ 190,000 dec 31, year 3 6 7 december 31 8 2 year 1 year 2 $ 11,191 interest expense $11,095 bonds payable $ 186,517 $188,208 10 11 co Ln LO

for formulas and calculations, refer to the image below -

В2 1 А C G Н |1 interest expense amortization 2 date cash interest book value of bond =(2.67301 9500)+(0.83962 *190000) jan 01, year 1 3 -190000 5%-G3*6% - 190000*5%G4*6% 190000*5%G5*6% dec 31, year 1 E4-D4 G3+F4 4 -G4+F5 -E5-D5 dec 31, year 2 5 -E6-D6 -G5+F6 dec 31, year 3 6 7 december 31 year 1 year 2 interest expenseE4 E5 bonds payable G4 -G5 10 11

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