Question

1.

Exercise 14-4 Straight-Line: Amortization of bond discount LO P2 Tano Company issues bonds with a par value of $180,000 on January 1, 2019. The bonds' annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $170,862 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare a straight-line amortization table for these bonds. Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 What is the amount of the discount on these bonds at issuance? Discount Required 2 >

2.

Answer 1

required 1 par value less isue price Discount $ $ $ 180,000 (170,862) 9,138 required 2 total bond ineterest expesne over life of bond amount paid payments of 7200 $ 43,200 parvlaue at maturity $ 180,000 total repaid $ 223,200 less amount borrowed $ (170,862) total bond interest expense $ 52,338 period 3 year x 2 semi annual = semi annual interest = 180000 x 8% x 6/12 = 7200 amortization per period = 9138/6 $ 1,523 required 3 unamortized carrying semi annual period discount valiue 01-01-2019 $ 9,138 $ 170,862 6-30-19 $ 7,615 $ 172,385 12-31-19 $ 6,092 $ 173,908 6-30-20 $ 4,569 $ 175,431 12-31-20 $ 3,046 $ 176,954 6-30-21 $ 1,523 $ 178,477 12-31-21 $ - $ 180,000 calculation $ 9,138 9137-1523: $ 7,615 7615-1523 = $ 6,092 6092-1523= $ 4,569 4569-1523= $ 3,046 3046-1523 $ 1,523 1523-1523= $ .

Required a date Credit Account Dec-31 Cash Discount on Bond Payable (balance) Bond Payable (to record bond issued on discount) Debit 186,534 13,466 200,000 Required b date Credit $ Debit 7,684 Account Jun-30 bond interest expense Discount on Bond Payable 13466-11782) cash ( 200000 x 6% *6/12) (to recod interest payment and dicount amortization) 1,684 6,000 Required c date Credit Debit 7,684 $ Account Dec-31 bond interest expense Discount on Bond Payable (11782-10098 cash ( 200000 x 6% *6/12) (to recod interest payment and dicount amortization) 1,684 6,000