Question

Supreme Autoparts Inc. issued $190,000 of 7%, 10-year bonds at a price of 82 on January 31, 2017. The market interest rate at the date of issuance was 9%, and the standard bonds pay interest semi-annually 1. Prepare an effective-interest amortization table for the bonds through the first three interest payments. 2. Record Supreme's issuance of the bonds on January 31, 2017, and payment of the first semi-annual interest amount and amortization of the bonds on July 31, 2017. Explanations are not required. 1. Prepare an effective-interest amortization table for the bonds through the first three interest payments. (Round your answers to the nearest whole dollar.) Supreme Autoparts Amortization Table A в C E Interest Payment Interest Expense Bond Discount Bond Discount Bond Semi-annual Amortization (3.5% of (4.5% of Preceding Bond Account Balance Carrying Amount Interest Date Maturity Value) Carrying Amount) (B-A) (Preceding D-C) ($190,000 - D) Jan 31, 2017 July 31, 2017 Jan 31, 2018 July 31, 2018 2. Record Supreme's issuance of the bonds on January 31, 2017, and payment of the first semi-annual interest amount and amortization of the bonds on July 31, 2017. (Record debits first, then credits. Explanations are not required.) Start by recording the issuance of bonds on January 31, 2017

Answer 1

A B D Interest payment Interest expense Date Jan. 31, 2017 July 31, 2017 Jan. 31, 2018 July. 31, 2018 Bond discount | Bond discount | Bond carrying amortization account amount =190000-G3 =190000*82% =D4-C4 =F3-E4 =190000-F4 =D5-C5 =F4-E5 =190000-F5 =D6-C6 =F5-E6 =190000-F6 =3.5%*190000 =3.5%*190000 3.5%*190000 =4.5%*G3 -4.5%*G4 -4.5%*G5 Working: A B C D E F G Interest | Interest | Bond discount payment expense amortization Date Jan. 31, 2017 July 31, 2017 Jan. 31, 2018 July 31, 2018 Bond discount | account balance 34,200 33,839 33,462 33,068 Bond carrying amount 155,800 156,161 156,538 156,932 6,650 6,650 6,650 7,011 7,027 7,044 361 377 394 Credit Date Account title and explanation Jan. 31, 2017 Cash ($190,000x82%) Discount on bonds payable Bonds payable Debit 155,800 34,200 190,000 Credit Debit 7,011 Date Account title and explanation July 31, 2017 Interest expense Discount on bonds payable Cash 361 6,650