Question

On July 1, 2016, Fisher Company issued 9% bonds in the face amount of $5,000,000, which mature on July 1, 2022. The bonds were issued for $4,782,217 to yield 10%. Fisher uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2019, the unamortized bond discount should be

Answer 1

At June 30, 2019, the unamortized bond discount should be

$ 124,369

Working:

Step-1:Calculation of discount on bonds payable
	Par Value				$       50,00,000
	Less Issue price				$       47,82,217
	Discount on bonds payable				$          2,17,783
Step-2:Preparation of discount amortization
Year Ended on		Cash interest paid		Interest Expenses		Discount Amortization			Unamortized discount			Bonds Carrying Value
July 1, 2016									$       2,17,783			$       47,82,217
June 30, 2017		$ 4,50,000		$       4,78,222			$       28,222		$       1,89,561			$       48,10,439
June 30, 2018		$ 4,50,000		$       4,81,044			$       31,044		$       1,58,517			$       48,41,483
June 30, 2019		$ 4,50,000		$       4,84,148			$       34,148		$       1,24,369			$       48,75,631
June 30, 2020		$ 4,50,000		$       4,87,563			$       37,563		$           86,806			$       49,13,194
June 30, 2021		$ 4,50,000		$       4,91,319			$       41,319		$           45,487			$       49,54,513
June 30, 2022		$ 4,50,000		$       4,95,451			$       45,451		0			$       50,00,000
Working:
Coupon Interest paid in cash			=	Par Value x Coupon rate
			=	$     50,00,000	x 9%
			=	$       4,50,000