Question

Required information The following information applies to the questions displayed below.) On January 1, 2021, Splash City issues $350,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 9% and the bonds issued at $321494. Required: 1. Using an amortization schedule, show that the bonds have a carrying value of $323,493 on December 31, 2022. (Round Interest expense to nearest whole dollar.) Date Interest Expense Carrying Value Cash Paid Increase in Carrying Value 01/01/2021 06/30/2021 12/31/2021 06/30/2022 12/31/2022 < 11 of 13 Prex 12 Next >

Answer 1

1) Amortization table

Date	Cash paid	Interest expense	Increase in Carrying value	carrying value
01/01/2021				321494
06/30/2021	350000*4% = 14000	321494*4.5% = 14467	467	321961
12/31/2021	14000	321961*4.5% = 14488	488	322449
06/30/2022	14000	322449*4.5% = 14510	510	322959
12/31/2022	14000	322959*4.5% = 14533	533	323492

Journal entry

date	account and explanation	Debit	Credit
	Bonds payable	350000
	Loss on retirement of bonds payable	56065
	Discount on bonds payable		26507
	Cash		379558