Question

On March 1, 2014, Angela Company issues $100,000, 4.8%, 4-year bonds to yield 8%, however the bonds are dated January 1, 2014. Interest is paid on Jun 30 and December 31. The proceeds from the bonds are $89,228 plus accrued interest. The company's fiscal year ends on December 31 and they use the straight-line method to amortize discounts and premiums.

a) What amount of interest expense will be reported on the 2014 Income Statement? (Please show the process)

Answer 1

Bonds Issue Poice - 89228. 89220 Discount on issue of bonds = 10oooo (face value - Issue price) - 10772 Accused Interest on bonds = 1,000,000 x 4.85.42 for 2 month Tenish yoki - 800 proceed from issue of bonds Issue price + Alcaved 89228 + 800 5.90028 - sot Interest

FUSO Straight line Amortization 10772 Discount on issue of bonds = i No of years = Y. y Per year = lotta a 2693 Per Half year = 2693 13465

journal entries

Date	Accounts Name	Debit	Credit
1-Mar	Cash a/c   dr	90028
	Discount on Bondspayable A/c   dr	10772
	To bonds payable A/c		100000
	To Interest Payable A/c		800
30-Jun	interest Expense A/c dr	1600
	Interest Payable A/c dr	800
	To Discount on Bondspayable A/c		1346.5
	To Cash A/c		1053.5
31-Dec	interest Expense A/c dr	2400
	To Discount on Bonds payable A/c		1346.5
	To Cash A/c		1053.5

note ;

Intebest expense on June 30c 1,00000* 4.81.84 = 1600 dogo on dec 31 100000 x 4.8 1.86 - 2400 on Tobcy Expense Statement = 0 NU) We Income 1600+2400 4000 TOR

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