Question

Required information Exercise 9-8B Record bonds issued at a discount and related semiannual interest (LO9-5) (The following information applies to the questions displayed below.) On January 1, Year 1, a company issues $430,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 9%, the bonds will issue at $394,979. Exercise 9-8B Part 1 Required: 1. Complete the first three rows of an amortization table. (Round your intermediate and final answers to the nearest whole dollar.) Date Cash Paid Interest Expense Change in Carrying Value Carrying Value 1/1/Year 1 6/30/Year 1 12/31/Year 1

Answer 1

Answer to Requirement 1:

Face Value of Bonds = $430,000

Annual Coupon Rate = 8.00%
Semiannual Coupon Rate = 4.00%
Semiannual Coupon = 4.00% * $430,000
Semiannual Coupon = $17,200

Annual Interest Rate = 9.00%
Semiannual Interest Rate = 4.50%

Date Cash Paid Interest Expense Change in Carrying Value Carrying Value 1/1/Year 1 6/30/Year 1 12/31/Year 1 $ $ 17,200 $ 17,200 $ 17,774 $ 17,800 $ 574 600 $ $ $ 394,979 395,553 396,153

Answer to Requirement 2:

Credit Date 1/1/Year 1 $ Debit 394,979 35,021 430,000 6/30/Year 1 $ 17,774 General Journal Cash Discount on Bonds Payable Bonds Payable Interest Expense Discount on Bonds Payable Cash Interest Expense Discount on Bonds Payable Cash 574 17,200 12/31/Year 1 17,800 600 17,200