Your answer is partially correct. Try again Nash Co. sells $461,000 of 8% bonds

Question

Your answer is partially correct. Try again Nash Co. sells $461,000 of 8% bonds on March 1, 2017, The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2020 The bonds yield 12% Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Round answers to 0 decimal places, e.g. 38,548.) Schedule of Bond Discount Amortization Effective-Interest Method Bonds Sold to Yield Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds Date 409530 $18,440 24572 6132 $18,440 $18,440 $18,440

Explanation / Answer

Answer:

1

Effective Interest Method

8% Bonds Sold to Yield 12%

Debit

Credit

Carrying Value of Bonds

Credit

Interest Expense

Bond

Date

Cash

Discount

3/1/2017

$409,532

9/1/2017

$18,440

$24,572

$6,132

415,664

3/1/2018

$18,440

$24,940

$6,500

422,163

9/1/2018

$18,440

$25,330

$6,890

429,053

3/1/2019

$18,440

$25,743

$7,303

436,356

9/1/2019

$18,440

$26,181

$7,741

444,098

3/1/2020

$18,440

$26,646

$8,206

452,304

9/1/2020

$18,440

$27,138

$8,698

461,000

Maturity value of bonds payable

461,000

Less:

Present value of $461,000 due in 7 periods at 6%
($461,000 X .66506)

306592.66

Present value of interest payable semiannually
($18,440 X 5.58238)

102939.0872

Proceeds from sale of bonds

409532

Discount on bonds payable

51468

2

Date

Description

Debit $

Credit $

3/1/2017

Cash

409532

Discount on Bonds Payable

51,468

Bonds Payable

461000

9/1/2017

Interest Expense

$24,572

Discount on Bonds Payable

$6,132

Cash

18440

12/31/2017

Interest Expense

16626.5

Discount on Bonds Payable
($1,762 X 4/6)

4333.2

Cash ($18440 X 4/6)

12293.3

Effective Interest Method

8% Bonds Sold to Yield 12%

Debit

Credit

Carrying Value of Bonds

Credit

Interest Expense

Bond

Date

Cash

Discount

3/1/2017

$409,532

9/1/2017

$18,440

$24,572

$6,132

415,664

3/1/2018

$18,440

$24,940

$6,500

422,163

9/1/2018

$18,440

$25,330

$6,890

429,053

3/1/2019

$18,440

$25,743

$7,303

436,356

9/1/2019

$18,440

$26,181

$7,741

444,098

3/1/2020

$18,440

$26,646

$8,206

452,304

9/1/2020

$18,440

$27,138

$8,698

461,000

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