Question

Bonds Issued at a Discount (Effective Interest)

Sicily Corporation issued $1,550,000 in 10% bonds (payable on December 31, 2029) on January 1, 2020, for $1,457,000. Interest is paid on June 30 and December 31. The market rate of interest is 11%.

Required:

Prepare the amortization table through December 31, 2021, using the effective interest rate method. If an amount box does not require an entry, leave it blank and if the answer is zero, enter "0". If required, round your answers to the nearest whole dollar.

Sicily Corporation
Amortization Table
Period	Cash Payment (Credit)	Interest Expense (Debit)	Discount on Bonds Payable (Credit)	Discount on Bonds Payable Balance	Carrying Value
At issue	$	$	$	$	$
6/30/20
12/31/20
6/30/21
12/31/21

Answer 1

SICILY CORPORATION
Amortization Table
Period	Cash payment (Credit )(5%)	Interest Expense (Debit ) (5.5%)	Discount On Bond Payable (Credit)	Discount on Bond Payable Balance	Carrying Value
At Issue				$93,000 {$1,550,000 -$1,457,000}	$ 1,457,000
6/30/20	$77,500        {$1,550,000*5%}	$80,135        {$1,457,000*5.5%}	$2,635            {$80,135-$77,500 }	$90,365        {$ 93,000 -$2,635}	$1,459,635 {$1,457,000+$2,635 }
12/31/20	$77,500        {$1,550,000*5%}	$80,280        {$1,459,635*5.5%}	$2,780            {$80,280-$77,500 }	$87,585        {$ 90,365 -$2,780}	$1,462,415 {$1,459,635+$2,780 }
6/30/21	$77,500        {$1,550,000*5%}	$80,433        {$1,462,415*5.5%}	$2,933            {$80,433-$77,500 }	$84,652        {$ 87,585 -$2,933}	$1,465,348 {$1,462,415+$2,933 }
12/31/21	$77,500        {$1,550,000*5%}	$80,594        {$1,465,348*5.5%}	$3,094            {$80,594-$77,500 }	$81,558        {$ 84,652 -$3,094}	$1,468,442 {$1,465,348+$3,094 }