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Please show all work and calculations, Thank you! On 1-1-2017 Avion, Inc. Sold Bonds with these...

Please show all work and calculations, Thank you!

On 1-1-2017 Avion, Inc. Sold Bonds with these particulars:
Face amt. of Bonds 630,000

Matures on 1-1-2027, in 10 yrs.

Stated annual rate of int. 7.25%

Effective annual rate of interest 6.00%

Int. is paid every six months; 6-30, 12-31

Req. 1, Assume the effective Interest Method in accounting for these Bonds, build a 10-year amortization table

Req. 2, Give General Journal entries to record the sale of the bonds, and the 1st 4 interest payments

Expert Solution

Answer:

Face value

$ 630,000.00

Period

10 years

effective interest rate

6%

Stated annual rate

7.25%

Semi-annual interest

$22837.5

($630,000*7.25%/2)

PV of semiannual interest

$339,764.33

=pv(0.03,20,-22837.5,0,0)

PV of Face value

$ 348,815.73

=$630,000*(1+((1+0.03)^20))

Issue price of bonds

$ 688,580.06

Requirement 1

Interest amortization Schedule

Interest paid (3.625% 0f $630,000)

Interest expense (3% 0f carrying value)

Amortization of premium (Interest paid-Interest expense)

Carrying Value (Carrying Value-Amortization of premium)

0

$ 688,580.06

1

22837.5

$ 20,657.40

$ 2,180.10

$ 686,399.96

2

22837.5

$ 20,592.00

$ 2,245.50

$ 684,154.46

3

22837.5

$ 20,524.63

$ 2,312.87

$ 681,841.59

4

22837.5

$ 20,455.25

$ 2,382.25

$ 679,459.34

5

22837.5

$ 20,383.78

$ 2,453.72

$ 677,005.62

6

22837.5

$ 20,310.17

$ 2,527.33

$ 674,478.29

7

22837.5

$ 20,234.35

$ 2,603.15

$ 671,875.14

8

22837.5

$ 20,156.25

$ 2,681.25

$ 669,193.89

9

22837.5

$ 20,075.82

$ 2,761.68

$ 666,432.21

10

22837.5

$ 19,992.97

$ 2,844.53

$ 663,587.67

11

22837.5

$ 19,907.63

$ 2,929.87

$ 660,657.80

12

22837.5

$ 19,819.73

$ 3,017.77

$ 657,640.04

13

22837.5

$ 19,729.20

$ 3,108.30

$ 654,531.74

14

22837.5

$ 19,635.95

$ 3,201.55

$ 651,330.19

15

22837.5

$ 19,539.91

$ 3,297.59

$ 648,032.60

16

22837.5

$ 19,440.98

$ 3,396.52

$ 644,636.07

17

22837.5

$ 19,339.08

$ 3,498.42

$ 641,137.66

18

22837.5

$ 19,234.13

$ 3,603.37

$ 637,534.29

19

22837.5

$ 19,126.03

$ 3,711.47

$ 633,822.82

20

22837.5

$ 19,014.68

$ 3,822.82

$ 630,000.00

Requirement 2

Journal entry

Date

Account title

Debit

Credit

30-6-2017

Interest expense

$ 20,657.40

Premium on issue of bonds

$ 2,180.10

Cash

$ 22,837.50

(To record payment of first interest)

31-12-2017

Interest expense

$ 20,592.00

Premium on issue of bonds

$ 2,245.50

Cash

$ 22,837.50

(To record payment of second interest)

30-6-2018

Interest expense

$ 20,524.63

Premium on issue of bonds

$ 2,312.87

Cash

22837.5

(To record payment of third interest)

31-12-2018

Interest expense

$ 20,455.25

Premium on issue of bonds

$ 2,382.25

Cash

22837.5

(To record payment of fourth interest)

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