Solution 1:
Chart Values are based on: | |||||
n= (4 Years*2) | 8 | Half years | |||
i= (11%/2) | 5.50% | Semi annual | |||
Cash Flow | Table Value | * | Amount | = | Present Value |
Principal | 0.65160 | * | $640,000 | = | $417,024 |
Interest (Annuity) [$640,000*10%*6/12] | 6.33457 | * | $32,000 | = | $202,706 |
Price of Bonds | $619,730 |
Solution 2:
Patey Pontoons | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
01-Jan-21 | Cash A/c Dr | $619,730 | |
Discount on Bond Payable | $20,270 | ||
To bonds payable | $640,000 | ||
(Being bond issued at Discount) |
Solution 3:
Bond Amortization Schedule | |||||
Date | Cash interest | Interest Expense | Discount amortization | Unamortized discount | Carrying value |
01-Jan-21 | $20,270 | $619,730 | |||
30-Jun-21 | $32,000 | $34,085 | $2,085 | $18,185 | $621,815 |
31-Dec-21 | $32,000 | $34,200 | $2,200 | $15,985 | $624,015 |
30-Jun-22 | $32,000 | $34,321 | $2,321 | $13,664 | $626,336 |
31-Dec-22 | $32,000 | $34,448 | $2,448 | $11,215 | $628,785 |
30-Jun-23 | $32,000 | $34,583 | $2,583 | $8,632 | $631,368 |
31-Dec-23 | $32,000 | $34,725 | $2,725 | $5,907 | $634,093 |
30-Jun-24 | $32,000 | $34,875 | $2,875 | $3,032 | $636,968 |
31-Dec-24 | $32,000 | $35,032 | $3,032 | $0 | $640,000 |
Solution 4:
Journal Entries | |||
Date | Particulars | Debit | Credit |
30-Jun-21 | Interest Expense Dr | $34,085 | |
To Discount on bond payable | $2,085 | ||
To Cash | $32,000 | ||
(To record Interest on June 30, 2021) |
Solution 5:
Bonds reported on December 31, 2021 = | 624015 |
Solution 6:
Interest expense to be reported in Income statement = | 68285 |
solution 7:
Journal Entries | |||
Date | Particulars | Debit | Credit |
31-Dec-24 | Interest Expense Dr | $35,032 | |
To Discount on bond payable | $3,032 | ||
To Cash | $32,000 | ||
31-Dec-24 | Bond Payable Dr | $640,000 | |
To Cash | $640,000 |
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