On January 1, 2015, Splash City issues $310,000 of 9% bonds, due in 20 years, wi
ID: 2447518 • Letter: O
Question
On January 1, 2015, Splash City issues $310,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 8%, the bonds will issue at $340,679.
1.) Complete the first three rows of an amortization table
Date Interest Expense Decrease in Carrying Value Carrying Value
6/30/15 ? ? ?
12/31/15 ? ? ?
2.) Record the bond issue on January 1, 2015, and the first two semiannual interest payments on June 30, 2015, and December 31, 2015.
1.) Complete the first three rows of an amortization table
Date Interest Expense Decrease in Carrying Value Carrying Value
6/30/15 ? ? ?
12/31/15 ? ? ?
2.) Record the bond issue on January 1, 2015, and the first two semiannual interest payments on June 30, 2015, and December 31, 2015.
Explanation / Answer
1. Date Interest Expense decrease in Carrying value Carrying
01/01/2015 310000
06/30/15 13183 767 309233
12/31/2015 13183 767 308466
2. 1Jan15 cash Account Dr. 340679
To bond payable 310000
To premium in Bond 30679
30june15 interest expenses Dr.13183
premium in bond Dr. 767
To cash 13950
Note : total cash expense = 310000 * 9% * 6/12
= 13950
less: preimium amortisation in as per straight
line amortisation 20years* semianually = 767
( 340679- 310000/40)
Interest expenses 13183
31Dec,15 interest expenses Dr.13183
premium in bond Dr. 767
To cash 13950
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