Question

In: Accounting

On January 1, 2021, Universe of Fun issues $900,000, 8% bonds that mature in 10 years. The market interest rate for bonds of similar risk and maturity is 9%, and the bonds issue for $841,464. Interest is paid semiannually on June 30 and December 31.

On January 1, 2021, Universe of Fun issues $900,000, 8% bonds that mature in 10 years. The market interest rate for bonds of similar risk and maturity is 9%, and the bonds issue for $841,464. Interest is paid semiannually on June 30 and December 31.

 

Required:

1. Complete the first three rows of an amortization schedule.

2. Record the issuance of the bonds on January 1, 2021.

3. Record the interest payments on June 30, 2021, and December 31, 2021.

Solutions

Expert Solution

1) Amortization table

Date Interest expense Interest paid Amortization Carrying value
Jan 1       841464
June 30 841464×9%×6/12 = 37866 36000 1866 843330
Dec 31 37950 36000 1950 845280
         

 

2) Journal entry

Date General Journal Debit Credit
Jan 1 Cash 841464  
  Discount on bonds payable 58536  
  Bonds payable   900000

 

3) Journal entry

Date General Journal Debit Credit
June 30 Interest expense 37866  
  Cash   36000
  Discount on bonds payable   1866
       
Dec 31 Interest expense 37950  
  Cash   36000
  Discount on bonds payable   1950

1) Amortization table

Date Interest expense Interest paid Amortization Carrying value
Jan 1       841464
June 30 841464×9%×6/12 = 37866 36000 1866 843330
Dec 31 37950 36000 1950 845280
         

 

Junaid answered 1 year ago
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