Question

Calculations Marketing Inc. issued 7.0% bonds with a par value of $370,000 and a five-year life on January 1, 2020, for $385,781. The bonds pay interest on June 30 and December 31. The market interest rate was 6% on the original issue date. Use TABLE 14A.1 and TABLE 14A.2. (Use appropriate factor(s) from the tables provided.)

Answer 1

1-
total interest expense	total cash interest paid-premium to be amortized	(370000*7%*5)-15781	113719
2-
Period ending	cash interest paid = face value*coupon rate*1/2	Interest expense =carrying value*market interest rate*1/2	Premium amortized =cash interest paid-interest expense	unamortized premium = anamortized premium-premium amortized	carrying value = carrying value-premium amortized
Jan 1 2020				15781	385781
June 30 2020	12950	11573.43	1376.57	14404.43	384404.4
Dec 31 2020	12950	11532.13	1417.867	12986.56	382986.6
June 30,2021	12950	11489.6	1460.403	11526.16	381526.2
Dec 31 2021	12950	11445.78	1504.215	10021.94	380021.9
June 30,2022	12950	11400.66	1549.342	8472.603	378472.6
Dec 31 2022	12950	11354.18	1595.822	6876.781	376876.8
June 30 2023	12950	11306.3	1643.697	5233.084	375233.1
Dec 31 2023	12950	11256.99	1693.007	3540.077	373540.1
June 30,2023	12950	11206.2	1743.798	1796.279	371796.3
Dec 31 2023	12950	11153.89	1796.112	0.167656	370000.2
3-
date	explanation	debit	credit
30-Jun	Interest expense	11573.43
	premium on bonds payable	1376.57
	cash		12950
Period	cash flow	present value factor at 6/2 =3% =1/(1+r)^n   r =6%/2 =3%	present value of cash flow
1	12950	0.970874	12572.82
2	12950	0.942596	12206.62
3	12950	0.915142	11851.08
4	382950	0.888487	340246.1
present value of bonds =sum of present value of cash flow