Prepare the first two years of an amortization table using the straight-line method.?

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Heathrow issues $2,400,000 of 9%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,073,868

Prepare the first two years of an amortization table using the straight-line method. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

Semiannual Period-End Unamortized Discount Carrying Value

1/01/2011

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6/30/2011

12/31/2011

6/30/2012

12/31/2012

1 Answer

  • 2,400,000 – 2,073,868 = 326,132 discount of bonds payable

    326,132 / 30 = $10,871 semi-annual discount amortization

    2,400,000 x 4.5% = $108,000 semi-annual cash interest payment

    10,871 + 108,000 = $118,871 semi-annual interest expense

    Bond Face Value – Unamortized Discount = Carrying Value

    . Date . . . . Expense Discount . Cash . . . .Bonds . . .Discount . Carrying

    . . . . . . . . . . . . . . . . . Amor. .Payment. .Payable . . .Balance. . .Value

    1/01/2011 . . . . . . . . . . . . . . . . . . . . . . .2,400,000 . 326,132 . 2,073,868

    6/30/2011 . .118,871 . 10,871 . 108,000 . 2,400,000 . 315,261 . 2,084,739

    12/31/2011 .118,871 . 10,871 . 108,000 . 2,400,000 . 304,390 . 2,095,610

    6/30/2012 . .118,871 . 10,871 . 108,000 . 2,400,000 . 293,519 . 2,106,481

    12/31/2012 .118,871 . 10,871 . 108,000 . 2,400,000 . 282,648 . 2,117,352

    Source(s): Accounting Fan


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