Question

BOND-1: Audrey Corporation On January 1, 2000, Audrey Corporation issued $100,000 of 10% coupon rate bonds to yield an effective rate of 12%. Interest is paid semiannually on June 30 and December 31. The bonds mature in five years, i.e., on January 1, 2005. Required: (1) What amount of cash did Audrey Corporation receive when the bonds were issued? Prepare the journal entry to record the bond issuance. (2) Prepare the amortization schedule for the entire bond's life (5 years). (3) Prepare the journal entry that Audrey Corporation would make on: (a) June 30, 2000 (b) December 31, 2004 (4) Prepare the journal entry to record the bond retirement on January 1, 2005. N-10 i = 6% V- 19,039 FV = 100,000) HT=51.70D) 15000)

Answer 1

1	n =	10
	I =	6%
	Cash Flow	Amount	Present Value
	Interest	$5,000	$36,800
	Principal	$100,000	$55,840
	Price of bonds		$92,640
	Date	General Journal	Debit	Credit
		Cash	$92,640
		Discount on Bonds Payable	$7,361
		Bonds Payable		$100,000
3	June 30	Interest Expense	$5,558		($92,640 x 6%)
		Discount on Bonds Payable		$558	Balance
		Cash		$5,000	($100,000 x 5%)
	Dec 31	Interest Expense	$5,592		[($92,640 + $558) x 6%]
		Discount on Bonds Payable		$592	Balance
		Cash		$5,000	($100,000 x 5%)
4	Jan 1, 2005	Bonds Payable	$100,000
		Cash		$100,000
2
	Date	Cash Paid	Interest Exp.	Amortization	Carrying Value
	Jan 1, 2000				$92,640
	June 30, 2000	$5,000	$5,558	$558	$93,198
	Dec 31, 2000	$5,000	$5,592	$592	$93,790
	June 30, 2001	$5,000	$5,627	$627	$94,418
	Dec 31, 2001	$5,000	$5,665	$665	$95,083
	June 30, 2002	$5,000	$5,705	$705	$95,788
	Dec 31, 2002	$5,000	$5,747	$747	$96,535
	June 30, 2003	$5,000	$5,792	$792	$97,327
	Dec 31, 2003	$5,000	$5,840	$840	$98,167
	June 30, 2004	$5,000	$5,890	$890	$99,057
	Dec 31, 2004	$5,000	$5,943	$943	$100,000