MacBride Enterprises sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below.
Period Cash
Payment
(Credit) Interest Expense
(Debit) Premium on
Bonds Payable
(Debit) Premium on Bonds
Payable Balance
(Credit) Bond Payable
Carrying Value
(Credit) At issue $6,457 $206,457 06/30/19 $9,000 $8,465 $535 5,922 205,922 12/31/19 9,000 8,443 557 5,365 205,365 06/30/20 9,000 8,420 580 4,785 204,785 12/31/20 ? ? ? ? ?
Required:
1. Indicate the stated annual interest rate on these bonds.
%
2. Calculate the effective annual interest rate on these bonds. (Note: Round to the nearest 0.1%.)
%
3. Determine the interest expense and premium amortization for the interest period ending December 31, 2020. (Note: Round to the nearest dollar.)
Period Cash
Payment
(Credit) Interest
Expense
(Debit)
Premium on Bonds
Payable (Debit) Premium on Bonds
Payable Balance
(Credit) Bond Payable
Carrying Value
(Credit) At issue $6,457 $206,457 6/30/19 $9,000 $8,465 $535 5,922 205,922 12/31/19 9,000 8,443 557 5,365 205,365 6/30/20 9,000 8,420 580 4,785 204,785 12/31/20
MacBride Enterprises sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below.
| Period | Cash Payment (Credit) | Interest Expense (Debit) | Premium on Bonds Payable (Debit) | Premium on Bonds Payable Balance (Credit) | Bond Payable Carrying Value (Credit) | |||||
| At issue | $6,457 | $206,457 | ||||||||
| 06/30/19 | $9,000 | $8,465 | $535 | 5,922 | 205,922 | |||||
| 12/31/19 | 9,000 | 8,443 | 557 | 5,365 | 205,365 | |||||
| 06/30/20 | 9,000 | 8,420 | 580 | 4,785 | 204,785 | |||||
| 12/31/20 | ? | ? | ? | ? | ? | |||||
Required:
1. Indicate the stated annual interest rate on these bonds.
%
2. Calculate the effective annual interest rate on these bonds. (Note: Round to the nearest 0.1%.)
%
3. Determine the interest expense and premium amortization for the interest period ending December 31, 2020. (Note: Round to the nearest dollar.)
| Period | Cash Payment (Credit) | Interest Expense (Debit) | Premium on Bonds Payable (Debit) | Premium on Bonds Payable Balance (Credit) | Bond Payable Carrying Value (Credit) | ||||||||||||||||||||
| At issue | $6,457 | $206,457 | |||||||||||||||||||||||
| 6/30/19 | $9,000 | $8,465 | $535 | 5,922 | 205,922 | ||||||||||||||||||||
| 12/31/19 | 9,000 | 8,443 | 557 | 5,365 | 205,365 | ||||||||||||||||||||
| 6/30/20 | 9,000 | 8,420 | 580 | 4,785 | 204,785 | ||||||||||||||||||||
| 12/31/20 | |||||||||||||||||||||||||
Related questions
Chekhov Company sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below.
| Period | Cash Payment (Credit) | Interest Expense (Debit) | Discount on Bonds Payable (Credit) | Discount on Bonds Payable Balance (Debit) | Bond Payable Carrying Value (Credit) |
| At issue | $8,000 | $192,000 | |||
| 6/30/2019 | $12,000 | $12,800 | $800 | 7,200 | $192,800 |
| 12/31/2019 | 12,000 | 12,800 | 800 | 6,400 | 193,600 |
| 6/30/2020 | ? | ? | ? | ? | ? |
Required:
1. Determine the stated interest rate on these bonds.
%
Effective Interest Premium Amortization
Polk Incorporated issued $440,000 of 13% bonds on July 1, 2013,for $454,963.51. The bonds were dated January 1, 2013, pay intereston each June 30 and December 31, are due December 31, 2017, andwere issued to yield 12%. Polk uses the effective interest methodof amortization.
In addition, prepare a bond interest expense and premiumamortization schedule for the bonds through June 30, 2014.
Polk incorporated
Bond interest Expense and Premium Amortization Schedule(Partial)
Effective Interest Method
13% Bonds Sold to Yield 12%
| Date | Cash Credit | Interest Expense Debit | Unamortized Premium Debit | Book Value of Bonds |
| 07/01/13 | $454,963.51 | |||
| 12/31/13 | $28,600 | $27,297.81 | $1,302.19 | $????? |
| 06/30/14 | $28,600 | $27,219.68 | $1,380.32 | $452,281 |
