Question

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

Answer 1

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)