Calculations Marketing Inc. issued 7.0% bonds with a par value of $370,000 and a five-year life...

Calculations Marketing Inc. issued 7.0% bonds with a par value of $370,000 and a five-year life on January 1, 2017, for $385,781. The bonds pay interest on June 30 and December 31. The market interest rate was 6% on the original issue date. (Use TABLE 14A.1 and TABLE 14A.2.)

Required:
1. Calculate the total bond interest expense over the life of the bonds.
2. Prepare an amortization table using the effective interest method.

Period Ending	Cash Interest Paid	Period Interest Expense	Premium Amort.	Unamortized premium	Carrying Value
Jan. 1/17
June 30/17
Dec. 31/17
June 30/18
Dec. 31/18
June 30/19
Dec. 31/19
June 30/20
Dec. 31/20
June 30/21
Dec. 31/21
Totals

3. Show the journal entries that Calculations Marketing Inc. would make to record the first two interest payments assuming a December 31 year-end.

1.Record the six months’ interest and premium amortization.

2.Record the six months’ interest and premium amortization.

4. Use the original market interest rate to calculate the present value of the remaining cash flows for these bonds as of December 31, 2019. Compare your answer with the amount shown on the amortization table as the balance for that date. (Use appropriate factor(s) from the tables provided.)

Expert Solution

ekkarill92 answered 1 year ago

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