Question

Question 8 Your answer is partially correct. Try again. Tamarisk Inc., a private company following ASPE, is having difficulty meeting its working capital requirements. As a result, on January 1, 2020, the company sold bonds with a face value of $2 million, receiving $1,480,000 in cash. The bonds have an interest rate of 6% and mature on January 1, 2022. Interest is payable semi-annually on January 1 and July 1. Set up a schedule of interest expense and discount amortization under the straight-line method. Credit Interest Payable Schedule of Discount Amortization Straight-Line Method Debit Interest Expense Credit Bond Payable Carrying Amount of Bonds Year Jan. 1, 2020 1480000 July 1, 2020 40000 170000 130000 Dec. 31, 2020 40000 170000 130000 July 1, 2021 40000 170000 130000 Dec. 31, 2021 40000 170000 130000

Answer 1

Schedule of discount amortization straight-line method
Year	Credit interest payable	Debit interest expense	Credit bond payable	Carrying amount of bonds
Jan. 1, 2020				1480000
July 1, 2020	60000	190000	130000	1610000
Dec. 31, 2020	60000	190000	130000	1740000
July 1, 2021	60000	190000	130000	1870000
Dec. 31, 2021	60000	190000	130000	2000000

Interest payable = 2000000*6%/2

Bond payable = (2000000-1480000)/4 = 130000

Interest expense = interest payable + bond payable

Carrying amount of bonds = previous carrying amount of bonds + bond payable