Using the hypothetical bond example provided below, create aneffective interest amortization table in Excel for the entire lifeof the bond using the following columns: payment number, paymentdate, beginning carrying value, effective interest rate, interestexpense, cash (interest) paid, discount/premium on bond payable(amortization amount), and ending carrying value.
$10,000,000, 4% bond
Issued on 1/1/13
Matures in 10 years
Semiannual interest payments on 6/30 and 12/31 of each year
Market rate for bonds of this type was 6% at the time of theirissue
Using the hypothetical bond example provided below, create aneffective interest amortization table in Excel for the entire lifeof the bond using the following columns: payment number, paymentdate, beginning carrying value, effective interest rate, interestexpense, cash (interest) paid, discount/premium on bond payable(amortization amount), and ending carrying value.
$10,000,000, 4% bond
Issued on 1/1/13
Matures in 10 years
Semiannual interest payments on 6/30 and 12/31 of each year
Market rate for bonds of this type was 6% at the time of theirissue
Related questions
Hillside issues $1,800,000 of 7%, 15-year bonds dated January 1,2015, that pay interest semiannually on June 30 and December 31.The bonds are issued at a price of $1,555,401.
| Required: | |
| 1. | Prepare the January 1, 2015, journal entry to record the bondsâissuance. |
2(a) For each semiannual period, complete thetable below to calculate the cash payment.
2(b) For each semiannual period, complete thetable below to calculate the straight-line discountamortization.
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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 | |||||||||||||||||||||||||
Problem 10-3B
Straight-line: Amortization of bond premium P1 P3
Refer to the bond details in Problem 10-2B, exceptassume that the bonds are issued at a price of $4,192,932.
Required
Prepare the January 1, 2013, journal entry to record the bonds'issuance.
For each semiannual period, compute (a) the cashpayment, (b) the straight-line premium amortization, and(c) the bond interest expense.
Determine the total bond interest expense to be recognized overthe bonds' life.
Prepare the first two years of an amortization table likeExhibit 10.11 using the straight-line method.
Prepare the journal entries to record the first two interestpayments.
Check
(3) $2,607,068
(4) 6/30/2014 carrying value, 4,073,991
1. Journal Entry:
| Date | Account Title | Debit | Credit |
| Jan1 2013 | Cash | 3,010,000 | |
| Discount on issue ofBonds | 390,000 | ||
| 10% Bonds Payable | 3,400,000 |
2. Cash Payment for Each semiannual period:
3,400,000 x 5% = $170,000
Straight Line Discount amortization = 390,000 / 20 = $19,500
Bond Interest Expenses = 170,000 + 19,500 = $189,500
3. Total Bond Interest expenses = 189,500 x 20 = $3,790,000
4. Amortization Table:
| Date | Interest Payment | Interest Expenses | Amortization of BondDiscount | Debit Balance in BondsDiscount | Book Value of the Bonds |
| 1 Jan 2013 | 390,000 | 3,010,000 | |||
| 30 June 2013 | 170,000 | 189,500 | 19,500 | 370,500 | 3,029,500 |
| Dec31 2013 | 170,000 | 189,500 | 19,500 | 351,000 | 3,049,000 |
5. Journal entries for interest:
| Date | Account Title | Debit | Credit |
| June 30, 2013 | Interest Expenses | 189,500 | |
| Discount on Issue ofBonds | 19,500 | ||
| Cash | 170,000 | ||
| Dec31, 2013 | Interest Expenses | 189,500 | |
| Discount on Issue ofBonds | 19,500 | ||
| Cash | 170,000 |
