Exercise 14-8 Your answer is incorrect. Try again. Presented below are three ind

Question

Exercise 14-8 Your answer is incorrect. Try again. Presented below are three independent situations. (a) Bonita Co. sold $1,930,000 of 12%, 10-year bonds at 106 on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on July 1 and January 1. If Bonita uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2017, and December 31, 2017. (Round answer to O decimal places, e.g. 38,548.) Interest expense to be recorded 5790 (b) Windsor Inc. issued $610,000 of 9%, 10-year bonds on June 30, 2017, for $505,047. This price provided a yield of 12% on the bonds. Interest is payable semiannually on December 31 and June 30. If Windsor uses the effective-interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2017. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.) Interest expense to be recorded

Explanation / Answer

a) Bond issue price = 1930000*1.06 = 2045800

Premium on bonds payable = 2045800-1930000 = 115800

Semi annual amortization of premium = 115800/20 = 5790

Interest paid = 1930000*12%*6/12 = 115800

Interest expense to be recorded = 115800-5790 = $110010

b) Discount on bonds payable = 610000-505047 = 104953

Interest expense to be recorded = 505047*12%*6/12 = $30303

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