Question

PRINTER VERSION BACK NEXT Question 4 On July 1, 2017, Global Satellites Corporation issued $1,390,000 of 10-year 8% bonds to yield a market interest rate of 7%. The bonds pay semi-annual interest on July 1 and January 1. Global has a December 31 year end. When the bonds were issued, Global received $1,488,781 Click here to view the factor table. Your answer is partially correct. Try again. Prepare an amortization table through January 1, 2019 (three interest periods) for this bond issue. (Round all amounts to the nearest dollar, e.g. 5,275.) GLOBAL SATELLITES CORPORATION Bond Premium Amortization interest Expense to Semi-annual interest periods Interest to be paid Premium Amortization Unamortized Bond Carrying Premium Amount Recorded July 1/17 66781 145678 Jan. 1/18 sco 55600 1 30987 439 62166 628 7452168 1452168 AN A de 9:52 AM 700-09.16. 2 d your PC

Answer 1

Amortization table
	Col I	Col II	Col III	Col IV	Col V
Date	Interest Payment($1,390,000*4%)	Interest expenses(Col V*3.5%)	Premium amorrtization(Col I -Col II)	Unamortized Premium	Bond carrying amount
01-Jul-17				98,781	14,88,781
01-Jan-18	55,600	52,107	3,493	95,288	14,85,288
01-Jul-18	55,600	51,985	3,615	91,673	14,81,673
01-Jan-19	55,600	51,859	3,741	87,932	14,77,932
01-Jul-19	55,600	51,728	3,872	84,060	14,74,060
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jul-17	Cash	14,88,781
		Bonds Payable		13,90,000
		Premium on Bond Payable		98,781
	31-Dec-18	Interest expenses	51,859
		Bond Payable	3,741
		Interest Payable		55,600
	GLOBAL SATELITES CORPORATION
	Statement of Financial Position(Partial)
	December 31,2018
	Current Liabilities
	Interest Payable	$                                                            55,600
	Non-Current Liabilities
	Bonds Payable	$                                                       14,77,932
Table values are based on:
Face Amount	$1,390,000
Interest Payment	$1,390,000*8%*6/12 =$55,600
Market Interest rate per period	3.5%
Cash Flow	Table Value(PV of 3.5% for 20 period)	Amount	Present Value
PV of Interest	14.2124	$55,600	$7,90,209
PV of Principal	0.50257	$13,90,000	$6,98,572
PV of Bonds Payable(Issue Price)			$14,88,782