Question

III. Bonds Payable

1. Issue price of the bonds (show work or assumptions):

2. Amortization schedule through 12/31/17:

                                    Cash              Int. Exp.             Amort                     Balance

            1/1/16                                                                                                 _________

            12/31/16         ________      ________         ________               _________

            12/31/17         ________      ________         ________               _________

       C. Journal entries

1. Entry for issue on 1/1/16:

            2. Entry for payment of interest on 12/31/16:

3. Entry for early retirement on 12/31/17:

Answer 1

Amortization Schedule
Date	Beginning book value	Annual coupon rate 4%	Yield 3%	Amortized Premium	Carrying value
{1}	{2}	{3 } = $ 1000,000 x 4%	{4} = {2 } x 3%	{5} = {3) - {4}	{6} = {2}-{5}
1-Jan-16					1,085,308.00
31-Dec-16	1,085,308.00	40,000.00	32,559.24	7,440.76	1,077,867.24
31-Dec-17	1,077,867.24	40,000.00	32,336.02	7,663.98	1,070,203.26

	Journal entries
Date	Account's tittle	Debit $	Credit $
Jan1,2016	Cash	1,085,308
	Bond Payable		1,000,000
	Bond Premium		85,308
	(To record issue of bond , face value $ 1,000,000 issued for $ 1,085,308 at 4% rate)
Dec 31,2016	Interest expenses	32,559.24
	Amortization of Bond premium	7,440.76
	Interest Payable		40,000
	( To record interest expenses and amortization for the year 2016 )
Dec 31,2016	Interest Payable	40,000
	Cash		40,000
	( To record payment of interest)