On January 1, 2014 Mooney Co. issued $400,000, 9%, 5-year bonds at 97. Interest is payable...

On January 1, 2014 Mooney Co. issued $400,000, 9%, 5-year bonds at 97. Interest is payable

annually on December 31

st

. The effective interest rate on the bond is 9.7871%

?

Prepare the journal entries for the original bond issue,

?

Prepare the amortization table for the bond discount. Make sure this table includes the

amount of the discount amortized each year.

?

Prepare the journal entry for the interest payment in the first year.

Expert Solution

Par value of Bonds			400,000
Stated rate of interest			9%
Annuity factor for 5 years @9.7871%			3.81149
Present value factor for Year-5			0.62696
Annual Cash interst (400000*9%)			36000
Present value of interest			137214
Present value of maturity			250784
issue price			387998


Journal entry:
Cash Account Dr.			387998
Discount on bonds payable Dr.			12002
Bonds payable				400000

Amort Chart
Date	Cash Int	Interest exp	Discount Amortized		Carrying Amount
01.01.14					387998
31.12.14	36000	37974	1974		389972
31.12.15	36000	38167	2167		392139
31.12.16	36000	38379	2379		394518
31.12.17	36000	38612	2612		397130
31.12.18	36000	38870	2870		400000

Journal entry for interest payment:
31.12.14	Interest expense Account Dr.			37974
	Cash Account				36000
	Discount on bonds payable Account				1974

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