Houston Company issued a $21,000, three-year, 6 percent bond on January 1, 2014.
ID: 2446235 • Letter: H
Question
Houston Company issued a $21,000, three-year, 6 percent bond on January 1, 2014. The bond interest is paid each December 31. The bond was sold to yield 5 percent.
Required:
Complete a bond amartization schedule: Use the effective-interest methond
2. What amounts will be reported on the income statement and balance sheet at the end of 2014, 2015, and 2016 (immediately before repayment of principal)
Houston Company issued a $21,000, three-year, 6 percent bond on January 1, 2014. The bond interest is paid each December 31. The bond was sold to yield 5 percent.
Required:
Complete a bond amartization schedule: Use the effective-interest methond
2. What amounts will be reported on the income statement and balance sheet at the end of 2014, 2015, and 2016 (immediately before repayment of principal)
Cash Interest Expense Amortization Premium Net Liability Balance nterest Date 01/01/2014 12/31/2014 12/31/2015 12/31/2016Explanation / Answer
Answer:
The issue value of the bond can be found using the "PV" in excel:
=PV(5%,3,1260,21000) = $21,571.9
That become the opening net liability balance.
1)
2)
A =($21,000*6%) B=(Prev. Liability balance*5%) C=A-B Date Cash Interest Interest Expenses Premium Amortization Net Liability balance 01-01-2014 21571.9 12/31/14 1260 1078.6 181.4 21390.5 12/31/15 1260 1069.5 190.5 21200.0 12/31/16 1260 1060.0 200.0 21000.0Related Questions
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