On January 1, 2018, Reese Incorporated issued bonds with a face value of $140,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $145,740. Reese used the effective interest rate method to amortize bond premium.Prepare an amortization table.What item(s) in the table would appear on the 2020 balance sheet?What item(s) in the table would appear on the 2020 income statement?What item(s) and amount in the table would appear on the 2020 statement of cash flows (Direct Method) and under what section the bond liability appear? cash paymentinterest expensediscount amortizationcarrying valuejan 1 2018 145740dec 31 20181120010202998144742dec 31 2019 dec 31 2020 dec 31 2021 dec 31 2022 totals56000502605740

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Answered: On January 1, 2018, Reese Incorporated…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

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On January 1, 2018, Reese Incorporated issued bonds with a face value of $140,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $145,740. Reese used the effective interest rate method to amortize bond premium.

Prepare an amortization table.
What item(s) in the table would appear on the 2020 balance sheet?
What item(s) in the table would appear on the 2020 income statement?
What item(s) and amount in the table would appear on the 2020 statement of cash flows (Direct Method) and under what section the bond liability appear?

	cash payment	interest expense	discount amortization	carrying value
jan 1 2018				145740
dec 31 2018	11200	10202	998	144742
dec 31 2019
dec 31 2020
dec 31 2021
dec 31 2022
totals	56000	50260	5740

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