Exercise 14-6 Pina Company sells 9% bonds having a maturity value of $1,550,000

Question

Exercise 14-6 Pina Company sells 9% bonds having a maturity value of $1,550,000 for $1,382,384. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1. Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to 0 decimal places, e.g. 38,548.) Schedule of Discount Amortization Straight-Line Method Year Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds Jan. 1, 2017 $ 155000 $ $ $ Jan. 1, 2018 155000 Jan. 1, 2019 155000 Jan. 1, 2020 155000 Jan. 1, 2021 155000 Jan. 1, 2022 155000 1550000

Explanation / Answer

Cash interest Discount Carrying paid expense Amortized amt of bonds 1-Jan 1,382,384 1/1/2018 139,500 173,023 33523 1,415,907 1/1/2019 139,500 173,023 33523 1,449,430 1/1/2020 139,500 173,023 33523 1,482,954 1/1/2021 139,500 173,023 33523 1,516,477 1/1/2022 139,500 173,023 33523 1,550,000 cash paid = 1,550,000*9% 139500 discount amortized = (1,550,000-1,382384)/5 33523.2

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