Question

On January 1, 2021, Bradley Recreational Products issued $150,000, 9%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $145,153 to yield an annual return of 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare an amortization schedule that determines interest at the effective interest rate. 2. Prepare an amortization schedule by the straight-line method. 3. Prepare the journal entries to record interest expense on June 30, 2023, by each of the two approaches. 5. Assuming the market rate is still 10%, what price would a second investor pay the first investor on June 30, 2023, for $15,000 of the bonds?

Answer 1

Amswol Page No 0 Given that, Bond issue - $ 150,000 Bond issue - term = 4 years Bond issue - interest rate -9%. Bond annual ciate of oreturn = 10%. ( 10.2 = 5%) Bonds issued at $ 145,153 O Amortization schedule that determines interest at the ebbiective interest rate :- Cash interest Effective interest recrease in balance Outstanding @.4.5 % / @ 5% balance $ 145,153 $ 6750 $ 4258 $508 * 145661 $ 6750 $ 4083 $146194 $ 6750 4310 & 14 6754 $6750 7338 $147342 $6750 $ 614 $144959 66750 $7398 $ 648 $6750 7430 $680 $ 149287 $6750 $ 7464 $714 $ 150,001 $54000 $58848 $4848 Cashiste kayment 533 560 588 my w $4367 $148607.

Cash interest = 150,000 X 415% (197=4.57) Page.no @ - $6450 effective interest - Previous outstanding balance. x 50%. Increase in balance = Effective interest - cash interest Outstanding balance = Previous outafanding balance + 1 Increase in balance. Avertization scheduled by the straight line method Cash payment = 150,000 X 4.59% = $6750° Recorded interest - fotal effective interest Ho.of payments = 58848 = $ 7356 Increase in balance - Recorded interest - cash . payment Outstanding balance - Previcuro out afanding balance + Increase in balance

Payment Cash payment | Recorded @ 457 interest Increase in balance $ 6750 $ 606 $ 6750 $ 606 Page No ③ outstanding balance $ 145,153 $145759 $ 146365 $ 146971 $147547 $ 148183 $ 148789 $149395 $150001 $ 7356 $ 4356 $ 4356 $ 7356 7356 $ 7356 t tt y $6450 6750 6750 $ 6750 $ 6750 $6450 $ 54000 $ 606 $ 606 $606 $ 606 $ 606 $ 606 $7356 $7356 4 Total $58848 $ 4848 © Journal entries to record interest expense para Juan 20, 2013 by each of two approaches Effective interest method ( from payment 5) Debit Gredit $ 1367 Particular Interest expense Discount on bondes payable - Cash 614 $ 6750

Page. No 4 Straight line method (from payment 5) Debit Credit $ 4356 Particular Interest expense Discount on bonds payable Cash $ 606 $ 6750 Price of the bonds on June 30, 2023 effective interest melihat s from payments | Price of the band's X 15000 Outstanding balance) 147959 150,000 = $147959/ = 1449519 14496 Price of the bonds = $14496]