Question

On January 1, 2021, Splash City issues $450,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.

Assuming the market interest rate on the issue date is 8%, the bonds will issue at $419,423.

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 1/1/21 6/30/21 12/31/21

Answer 1

Requirement 1

Date	Cash paid	Interest expense	Change in carrying value	Carrying value
1/1/21				$ 419,423
6/30/21	$ 15,750	$ 16,777	$ 1,027	$ 420,450
12/31/21	$ 15,750	$ 16,818	$ 1,068	$ 421,518

Requirement 2

Date	Account Title and Explanation	Debit	Credit
January 01, 2021	Cash	$ 419,423
	Discount on bonds payable	$ 30,577
	Bonds payable		$ 450,000
	(To record Issuance of bonds )
June 30, 2021	Bond interest expense	$ 16,777
	Discount on bonds payable		$ 1,027
	Cash		$ 15,750
	(Interest on bond paid and discount amortized)
December 31, 2021	Bond interest expense	$ 16,818
	Discount on bonds payable		$ 1,068
	Cash		$ 15,750
	(Interest on bond paid and Discount amortized)