Question

Scott Matthew, Inc. issued $100,000 of 14%, 10-year bonds payable on January 1, 2018. The market interest rate at the date of issuance was 12%, and the bonds pay interest semiannually. (Click the icon to view Present Value of $1 table.) 2 (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. How much cash did the company receive upon issuance of the bonds payable? (Round to the nearest dollar.) (Use the factor tables provided with factors rounded to three decimal places. Round all currency amounts to the nearest dollar.) Upon issuance of the bonds payable, the company received $ i Requirements 1. How much cash did the company receive upon issuance of the bonds payable? (Round to the nearest dollar.) 2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments. (Round to the nearest dollar.) Journalize the issuance of the bonds on January 1, 2018, and the first and second payments of the semiannual interest amount and amortization of the bonds on June 30, 2018, and December 31, 2018. Explanations are not required. Print Done

Answer 1

Solution 1:

Chart Values are based on:
n= (10 Years*2)	20	Half years
i= (12%/2)	6%	Semi annual
Cash Flow	Table Value	*	Amount	=	Present Value
Principal	0.312	*	$1,00,000	=	$31,200
Interest (Annuity) [$100,000*14%*6/12]	11.470	*	$7,000	=	$80,290
Price of Bonds					$1,11,490

Solution 2:

Bond Amortization Schedule
Date	Cash interest	Interest Expense	Premium amortization	Carrying value
01-Jan-18				$1,11,490
30-Jun-18	$7,000	$6,689	$311	$1,11,179
31-Dec-18	$7,000	$6,671	$329	$1,10,850

Solution 3:

Scott Matthew Inc.
Journal Entries
Date	Particulars	Debit	Credit
01-Jan-18	Cash A/c Dr	$1,11,490
	To Premium on bond payable		$11,490
	To bonds payable		$1,00,000
30-Jun-18	Interest Expense Dr	$6,689
	Premium on Bond payable Dr	$311
	To Cash		$7,000
31-Dec-18	Interest Expense Dr	$6,671
	Premium on Bond payable Dr	$329
	To Cash		$7,000