On January 1, 2016, Parker Company issued bonds with a face value of $69,000, a
ID: 2594167 • Letter: O
Question
On January 1, 2016, Parker Company issued bonds with a face value of $69,000, a stated rate of interest of 9 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 11 percent at the time the bonds were issued. The bonds sold for $63,900. Parker used the effective interest rate method to amortize the bond discount. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
a. Prepare an amortization table.
b. What is the carrying value that would appear on the 2019 balance sheet?
c. What is the interest expense that would appear on the 2019 income statement?
d. What is the amount of cash outflow for interest that would appear in the operating activities section of the 2019 statement of cash flows?
On January 1, 2016, Parker Company issued bonds with a face value of $69,000, a stated rate of interest of 9 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 11 percent at the time the bonds were issued. The bonds sold for $63,900. Parker used the effective interest rate method to amortize the bond discount. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
a. Prepare an amortization table.
Cash Payment Expense Amortization Carrying Value Interest Discount Date January 1, 2016 December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 Totals 63,900 6,210 7,029 819 64,719 6,210 7,029 819Explanation / Answer
Date Cash Interest Discount Carrying payment Expense Amortization value 1/1/2016 63,900 12/31/2016 6,210 7029 819 64,719 12/31/2017 6,210 7119 909 65628 12/31/2018 6,210 7219 1009 66637 12/31/2019 6,210 7330 1120 67757 12/31/2020 6,210 7453 1243 69000 totals Cash payment = 69000*9% 6210 interest expense = CV *11% b) Carrying value 67,757 c) interest expense 7,330 d) cash flow 6,210
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