Solution 1:
Chart Values are based on: | |||||
n= (4 Years*2) | 8 | Half years | |||
i= (11%/2) | 5.00% | Semi annual | |||
Cash Flow | Table Value | * | Amount | = | Present Value |
Principal | 0.676839 | * | $600,000 | = | $406,104 |
Interest (Annuity) [$800,000*10%*6/12] | 6.463213 | * | $18,000 | = | $116,338 |
Price of Bonds | $522,441 |
Solution 2:
Patey Pontoons | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
01-Jan-21 | Cash A/c Dr | $522,441 | |
Discount on Bond Payable | $277,559 | ||
To bonds payable | $800,000 | ||
(Being bond issued at Discount) |
Solution 3:
Bond Amortization Schedule | |||||
Date | Cash interest | Interest Expense | Discount amortization | Unamortized discount | Carrying value |
01-Jan-21 | $277,559 | $522,441 | |||
30-Jun-21 | $18,000 | $26,122 | $8,122 | $269,436 | $530,564 |
31-Dec-21 | $18,000 | $26,528 | $8,528 | $260,908 | $539,092 |
30-Jun-22 | $18,000 | $26,955 | $8,955 | $251,954 | $548,046 |
31-Dec-22 | $18,000 | $27,402 | $9,402 | $242,551 | $557,449 |
30-Jun-23 | $18,000 | $27,872 | $9,872 | $232,679 | $567,321 |
31-Dec-23 | $18,000 | $28,366 | $10,366 | $222,313 | $577,687 |
30-Jun-24 | $18,000 | $28,884 | $10,884 | $211,429 | $588,571 |
31-Dec-24 | $18,000 | $29,429 | $11,429 | $200,000 | $600,000 |
Solution 4:
Journal Entries | |||
Date | Particulars | Debit | Credit |
30-Jun-21 | Interest Expense Dr | $26,122 | |
To Discount on bond payable | $8,122 | ||
To Cash | $18,000 | ||
(To record Interest on June 30, 2021) |
Solution 5:
Bonds reported on December 31, 2021 = | 539092 |
Solution 6:
Interest expense to be reported in Income statement = | 52650 |
Solution 7:
Journal Entries | |||
Date | Particulars | Debit | Credit |
31-Dec-24 | Interest Expense Dr | $29,429 | |
To Discount on bond payable | $11,429 | ||
To Cash | $18,000 | ||
31-Dec-24 | Bond Payable Dr | $800,000 | |
To Cash | $800,000 |
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