****Please show the equation used to calculate the answers for the schedule belo
ID: 2459698 • Letter: #
Question
****Please show the equation used to calculate the answers for the schedule below. For example, I will need to know how the cash received is calculated. Thank you!
On January 1, 2014, Novotna Company purchased $418,600, 8% bonds of Aguirre Co. for $371,271. The bonds were purchased to yield 11% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2019. Novotna Company uses the effective-interest method to amortize discount or premium. On January 1, 2016, Novotna Company sold the bonds for $372,875 after receiving interest to meet its liquidity needs.
Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 1,250.)
Schedule of Interest Revenue and Bond Discount
Amortization—Effective-Interest Method
Bonds Purchased to Yield
Date
Interest Receivable
Or
Cash Received
Interest
Revenue
Bond
Discount
Amortization
Carrying
Amount of
Bonds
Schedule of Interest Revenue and Bond Discount
Amortization—Effective-Interest Method
Bonds Purchased to Yield
Date
Interest Receivable
Or
Cash Received
Interest
Revenue
Bond
Discount
Amortization
Carrying
Amount of
Bonds
$
7/1/14$
$
12/31/14 7/1/15 12/31/15 7/1/16 12/31/16 7/1/17 12/31/17 7/1/18 12/31/18 Total$
$
$
Explanation / Answer
Bond discount = $(418,600 - 371,271) = $47,329
Semi-annual coupon rate = 8% / 2 = 4%
Semi-annual yield = 11% / 2 = 5.5%
Bond discount amortization schedule as follows:
Date Interest Rcvble @4% x Face Value Interest Revenue @5.5% of Book Value Amortization of Discount Balance in Bond Discount Bond Payable Book Value of Bond (A) (B) (C) = (B) - (A) (D) (E) (F) = (E) - (D) Jan 1, 2014 47,329 4,18,600 3,71,271 Jul 1, 2014 16,744 20,420 3,676 43,653 4,18,600 3,74,947 Jan 1, 2015 16,744 20,622 3,878 39,775 4,18,600 3,78,825 Jul 1, 2015 16,744 20,835 4,091 35,684 4,18,600 3,82,916 Jan 1, 2016 16,744 21,060 4,316 31,367 4,18,600 3,87,233 Jul 1, 2016 16,744 21,298 4,554 26,813 4,18,600 3,91,787 Jan 1, 2017 16,744 21,548 4,804 22,009 4,18,600 3,96,591 Jul 1, 2017 16,744 21,812 5,068 16,941 4,18,600 4,01,659 Jan 1, 2018 16,744 22,091 5,347 11,593 4,18,600 4,07,007 Jul 1, 2018 16,744 22,385 5,641 5,952 4,18,600 4,12,648 Jan 1, 2019 16,744 22,696 5,952 0 4,18,600 4,18,600 TOTAL 1,67,440 2,14,769 47,329Related Questions
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