Question

On January 1, 2020, Kingbird Company purchased $420,000, 10% bonds of Aguirre Co. for $389,086. The bonds were purchased to yield 12% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Kingbird Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Kingbird Company sold the bonds for $390,653 after receiving interest to meet its liquidity needs.

Schedule of Interest Revenue and Bond Discount Amortization—Effective-Interest Method Bonds Purchased to Yield
Date		Interest Receivable Or Cash Received		Interest Revenue		Bond Discount Amortization		Carrying Amount of Bonds
1/1/20		$		$		$		$
7/1/20
1/1/21
7/1/21
1/1/22
7/1/22
1/1/23
7/1/23
1/1/24
7/1/24
1/1/25
Total		$		$		$

Answer 1

Working Notes:
	Calculation of Discount amount and half yearly coupon rate
		Par Value of the Bonds =	$                       4,20,000
		Issued price	$                       3,89,086
		Discount to be amortized	$                           30,914
		Rate of interest of Coupon	10%
		Yearly Coupon Amount	$                           42,000
		Half yearly coupon amount =	$                           21,000
		Market Rate of interest =	12%
		Half yearly interest rate = 12% / 2 =	6.00%
SOLUTION :
	Schedule of Interest revenue and bond Discount Amortization
	Effective interest Method
	Date	Interest Receivable or Cash Received	Interest Revenue @ 6.0% on Carrying Amount	Bond Discount Amortization	Caryying Amount of Bonds
	1/1/20				$         3,89,086
	7/1/20	$                                                                    21,000	$                           23,345	$                   2,345	$         3,91,431
	1/1/21	$                                                                    21,000	$                           23,486	$                   2,486	$         3,93,917
	7/1/21	$                                                                    21,000	$                           23,635	$                   2,635	$         3,96,552
	1/1/22	$                                                                    21,000	$                           23,794	$                   2,794	$         3,99,346
	7/1/22	$                                                                    21,000	$                           23,961	$                   2,961	$         4,02,307
	1/1/23	$                                                                    21,000	$                           24,139	$                   3,139	$         4,05,446
	7/1/23	$                                                                    21,000	$                           24,327	$                   3,327	$         4,08,773
	1/1/24	$                                                                    21,000	$                           24,526	$                   3,526	$         4,12,299
	7/1/24	$                                                                    21,000	$                           24,738	$                   3,738	$         4,16,037
	1/1/25	$                                                                    21,000	$                           24,963	$                   3,963	$         4,20,000