Question

Bonds Payable: On January 1, 2014 – ABC issued $800,000.00 of 20-year, 11% bonds for $739,814.81, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30th and December 31.

a. Confirm the bond issue price.

b. Indicate the financial statement effects using the template for

(1) bond issuance

(2) semiannual interest payable and discount amortization on June 30, 2014

(3) semiannual interest payment and discount amortization on December 31, 2014.

Answer 1

ans:

given data:

• Bonds Payable: On January 1, 2014 – ABC issued $800,000.00 of 20-year
• 11% bonds for $739,814.81
• yielding a market rate of 12%
• Interest is payable semiannually on June 30th and December 31.

a). Confirm the bond issue price:

•   price for bond issue = $739,814.81 ( from the given data)

b) Indicate the financial statement effects using the template for given follows:

1) bond issuance:

  bond issuance = $739,814.81 ( from the given question)

(2) semiannual interest payable and discount amortization on June 30, 2014:

•   interest payble for semiannual = 800000*5.5%

=$44000

interest payble for semiannual   =$44000

• discount amortization on June 30, 2014 =( $739,814.81*6%) -($800000*5.5%)

= 44388.88-44000

= $388.88   

discount amortization on June 30, 2014 = $388.88

(3) semiannual interest payment and discount amortization on December 31, 2014:

•   semiannual interest payment = $800000*5.5%

=  $44000

semiannual interest payment  =  $44000

•   discount amortization on December 31, 2014 = ((739814.81+388.88)*6%) - (800000*5.5%)

=$ 44,412.2214 - $ 44,000

= $412.2214.

discount amortization on December 31, 2014  = $412.2214.