Respuesta :
Answer:
Date Interest Interest Amortization Bond's
payment expense bond discount book value
Jan. 1, 2018 457,102
June 30, 2018 22,500 23,572.45 1,072.45 458,174.45
Dec. 31, 2018 22,500 23,572.45 1,072.45 459,246.90
Assuming you are using a straight line amortization of bond discount, then the amortization per coupon payment = $42,898 / 40 = $1,072.45
January 1, 2018, bonds are issued
Dr Cash 457,102
Dr Discount on bonds payable 42,898
Cr Bonds payable 500,000
June 30, 2021, first coupon payment
Dr Interest expense 23,572.45
Cr Cash 22,500
Cr Discount on bonds payable 1,072.45
December 31, 2021, second coupon payment
Dr Interest expense 23,572.45
Cr Cash 22,500
Cr Discount on bonds payable 1,072.45
If the company uses the effective interest method, the numbers vary a little:
amortization of bond discount on first coupon payment:
($457,102 x 5%) - ($500,000 x 4.5%) = $22,855.10 - $22,500 = $355.10
Journal entry to record first coupon payment:
Dr Interest expense 22,855.10
Cr Cash 22,500
Cr Discount on bonds payable 355.10
amortization of bond discount on second coupon payment:
($458,174.45 x 5%) - ($400,000 x 4.5%) = $22,908.72 - $22,500 = $408.72
Journal entry to record second coupon payment:
Dr Interest expense 22,908.72
Cr Cash 22,500
Cr Discount on bonds payable 408.72
1. The completion of Amortization Table (first three rows) is as follows:
Date Interest Interest Amortization Bond Payable
Payment Expense Bond Discount Balance
Jan. 1, 2018 $457,102.00
June 30, 2018 $22,500 $22,855.10 $355.10 457,457.10
Dec. 31, 2018 22,500 22,872.86 372.86 $457,829.96
2. Journal Entries:
Bonds Issuance on January 1, 2018:
Jan. 1, 2018 Debit Cash $457,102
Debit Bonds Discount $42,898
Credit Bonds Payable $500,000
To record bonds issuance.
June 30, 2018 Debit Interest Expense $22,855.10
Credit Bonds Discount $355.10
Credit Cash $22,500
To record the first semiannual interest payment.
Dec. 31, 2018 Debit Interest Expense $22,872.86
Credit Bonds Discount $372.86
Credit Cash $22,500
To record the second semiannual interest payment.
Data and Calculations:
Bonds Payable = $500,000
Cash Proceeds = $457,102
Bonds Discount = $42,898
Coupon interest rate = 9% annually
Maturity Period = 20 years
Effective (market) interest rate = 10%
June 30, 2018:
Interest Expense = $22,855.10 ($457,102 x 10% x 6/12)
Cash Payment = $22,500.00 ($500,000 x 9% x 6/12)
Amortization = $355.10
Bonds Payable balance = $457,457.10 ($457,102 + $355.10)
December 31, 2018:
Interest Expense = $22,872.86 ($457,457.10 x 10% x 6/12)
Cash Payment = $22,500.00 ($500,000 x 9% x 6/12)
Amortization = $372.86
Bonds Payable balance = $457,829.96 ($457,457.10 + $372.86)
Analysis of Entries:
Jan. 1, 2018 Cash $457,102 Bonds Discount $42,898 Bonds Payable $500,000
June 30, 2018 Interest Expense $22,855.10 Bonds Discount $355.10 Cash $22,500
Dec. 31, 2018 Interest Expense $22,872.86 Bonds Discount $372.86 Cash $22,500
Learn more: https://brainly.com/question/21415647
