Danny\'s Hamburgers issued 6%, 10-year bonds payable at 90 on December 31, 2018,
ID: 2522187 • Letter: D
Question
Danny's Hamburgers issued 6%, 10-year bonds payable at 90 on December 31, 2018, At December 31, 2020, Danny reported the bonds payable as follows: EEB (Click the icon to view the bonds payable.) Danny's pays semiannual interest each June 30 and December 31, (Assume bonds payable are amortized using the straight-line amortization method.) Read the requirements Requirement 1. Answer the following questions about Danny's bonds payable - x Data Table Requirments Long-term Liabilities: 1. Answer the following questions about Danny's bonds payable: 600,000 (48,000) s 552,000 Bonds Payable a. What is the maturity value of the bonds? b. What is the carrying amount of the bonds at December 31, 2020? c. What is the semiannual cash interest payment on the bonds? d. How much interest expense should the company record each year? Less: Discount on Bonds Payable Print Done 2. Record the June 30, 2020, semiannual interest payment and amortization of discount Print DoneExplanation / Answer
Solution 1:
a. Maturity value of bond = Bond payable value given in Balance sheet = $600,000
b. Carrying Amout of the bond at december 31,2020 = $552,000
c. Semi annual cash interest payment = Face Value of Bond * Coupon rate * 6/12
= 600000* 6% * 6/12 = $18000
d. Amortisation of discount on bond each year = Discount on bond / 10 years = ($600000*10%) /10 = $6000
Interest Expense each year = Cash Payment of interest each year + Amortisation of Discount on bond
= ($600000 * 6%) + $6000 = $42000
Solution 2:
Date Particulars Debit Credit 6/30/2020 Interest Expense Dr $21,000.00 To Cash A/c $18,000.00 To Discount on issue of Bond $3,000.00 (Recoring semi annual interest payment and amortisation of discount)Related Questions
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