(a) Your answer is partially correct. Try again. Nash Co. sells $461,000 of 8% b
ID: 2600595 • Letter: #
Question
(a) 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 $18,440Explanation / Answer
Maturity period = 3.5 years
Semiannual interest = $461000 x 4% = $18440
Semiannual yield = 6%
Total number of semiannual period = 3.5 x 2 = 7
Issue price of the bond
= $18440 * PVIFA (6%, 7) + $461000 * PVIF (6%, 7)
= $18440 * 5.58238 + $461000 * 0.66506
= $409531
Discount on issue of bond = $461000 - $409531 =$51468
Amortization schedule (effective interest method)
Date
Interest Payment @ 4%
Interest Expense @ 6%
Amortization of bond discount
debit Balance in the Bond discount Account
Credit Balance in the bonds Payable Account
Book value/Carrying Value of the bond
$
$
$
$
$
$
31-01-2017
$51,468.00
$461,000.00
$409,532.00
9/1/2017
$18,440.00
$24,572.00
$6,132.00
$45,336.00
$461,000.00
$415,664.00
31-01-2018
$18,440.00
$24,939.84
$6,499.84
$38,836.16
$461,000.00
$422,163.84
9/1/2018
$18,440.00
$25,329.83
$6,889.83
$31,946.33
$461,000.00
$429,053.67
31-01-2019
$18,440.00
$25,743.22
$7,303.22
$24,643.11
$461,000.00
$436,356.89
9/1/2019
$18,440.00
$26,181.41
$7,741.41
$16,901.70
$461,000.00
$444,098.30
31-01-2020
$18,440.00
$26,645.90
$8,205.90
$8,695.80
$461,000.00
$452,304.20
9/1/2020
$18,440.00
$27,138.25
$7,435.00
$0.00
$461,000.00
$461,000.00
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Date
Interest Payment @ 4%
Interest Expense @ 6%
Amortization of bond discount
debit Balance in the Bond discount Account
Credit Balance in the bonds Payable Account
Book value/Carrying Value of the bond
$
$
$
$
$
$
31-01-2017
$51,468.00
$461,000.00
$409,532.00
9/1/2017
$18,440.00
$24,572.00
$6,132.00
$45,336.00
$461,000.00
$415,664.00
31-01-2018
$18,440.00
$24,939.84
$6,499.84
$38,836.16
$461,000.00
$422,163.84
9/1/2018
$18,440.00
$25,329.83
$6,889.83
$31,946.33
$461,000.00
$429,053.67
31-01-2019
$18,440.00
$25,743.22
$7,303.22
$24,643.11
$461,000.00
$436,356.89
9/1/2019
$18,440.00
$26,181.41
$7,741.41
$16,901.70
$461,000.00
$444,098.30
31-01-2020
$18,440.00
$26,645.90
$8,205.90
$8,695.80
$461,000.00
$452,304.20
9/1/2020
$18,440.00
$27,138.25
$7,435.00
$0.00
$461,000.00
$461,000.00
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