Question

On January 1, 2018, Parker Company issued bonds with a face value of $53,000, a stated rate of interest of 11 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 13 percent at the time the bonds were issued. The bonds sold for $49,272. Parker used the effective interest rate method to amortize the bond discount. Required: a. Prepare an amortization table. b. At what amount would the bond liability appear on the 2021 balance sheet? c. What item(s) and amount in the table would appear on the 2021 income statement? d. What item(s) and amount in the table would appear on the 2021 statement of cash flows (Direct Method) and under what section the bond liability appear? Complete this question by entering your answers in the tabs below. Req A Req B to D Prepare an amortization table. (Make sure that the unamortized discount equals to 'o' and the Carrying value equals to face value of the bond in the last period. Round the intermediate calculations and answers to the nearest whole dollar amount.) Amortization Schedule Cash Interest Discount Payment Expense Amortization Carrying Value 49,272 49,847 5,830 6,405 575 January 1, 2018 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022

Answer 1

Solution a:

Bond Amortization Schedule
Date	Cash Paid	Interest Expense	Discount Amortized	Carrying Value
1-Jan-18				$49,272
31-Dec-18	$5,830	$6,405	$575	$49,847
31-Dec-19	$5,830	$6,480	$650	$50,498
31-Dec-20	$5,830	$6,565	$735	$51,232
31-Dec-21	$5,830	$6,660	$830	$52,062
31-Dec-22	$5,830	$6,768	$938	$53,000

Solution b:

carrying value of bond liabilities on 31.12.2021 = $52,062

Solution c:

Interest expense to appear in income statement = $6,660

Solution d:

Interest paid to appear in statement of cash flow = $5,830 - Outflow - Operating activities