Homework Help is Here – Start Your Trial Now!
Business
Accounting
On January 1, Year 1, Reese Incorporated issued bonds with a face value of $170,000, 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 $176,970. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item in the table would appear on the Year 3 balance sheet? c. What item in the table would appear on the Year 3 income statement? d. What item and amount in the table would appear on the Year 3 statement of cash flows (Direct Method) and under which section of the statement of cash flows would this item appear? (For all requirements, round intermediate calculations and final answers to the nearest whole dollar amount.) Complete this question by entering your answers in the tabs below. Req A Req B to D Prepare an amortization table. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals Amortization Schedule Premium Cash Interest Payment Expense Amortization 13,600 13,600 12,388 12,388 1,212 1,212 Carrying Value 176,970 175,758

On January 1, Year 1, Reese Incorporated issued bonds with a face value of $170,000, 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 $176,970. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item in the table would appear on the Year 3 balance sheet? c. What item in the table would appear on the Year 3 income statement? d. What item and amount in the table would appear on the Year 3 statement of cash flows (Direct Method) and under which section of the statement of cash flows would this item appear? (For all requirements, round intermediate calculations and final answers to the nearest whole dollar amount.) Complete this question by entering your answers in the tabs below. Req A Req B to D Prepare an amortization table. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals Amortization Schedule Premium Cash Interest Payment Expense Amortization 13,600 13,600 12,388 12,388 1,212 1,212 Carrying Value 176,970 175,758

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PB: Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1,...
See similar textbooks
icon
Related questions
Question

Subject: accounting 

On January 1, Year 1, Reese Incorporated issued bonds with a face value of $170,000, 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 $176,970. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item in the table would appear on the Year 3 balance sheet? c. What item in the table would appear on the Year 3 income statement? d. What item and amount in the table would appear on the Year 3 statement of cash flows (Direct Method) and under which section of the statement of cash flows would this item appear? (For all requirements, round intermediate calculations and final answers to the nearest whole dollar amount.) Complete this question by entering your answers in the tabs below. Req A Req B to D Prepare an amortization table. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals Amortization Schedule Premium Cash Interest Payment Expense Amortization 13,600 13,600 12,388 12,388 1,212 1,212 Carrying Value 176,970 175,758
Transcribed Image Text:On January 1, Year 1, Reese Incorporated issued bonds with a face value of $170,000, 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 $176,970. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item in the table would appear on the Year 3 balance sheet? c. What item in the table would appear on the Year 3 income statement? d. What item and amount in the table would appear on the Year 3 statement of cash flows (Direct Method) and under which section of the statement of cash flows would this item appear? (For all requirements, round intermediate calculations and final answers to the nearest whole dollar amount.) Complete this question by entering your answers in the tabs below. Req A Req B to D Prepare an amortization table. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals Amortization Schedule Premium Cash Interest Payment Expense Amortization 13,600 13,600 12,388 12,388 1,212 1,212 Carrying Value 176,970 175,758
Expert Solution
steps

Step by step

Solved in 5 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Bond Amortization
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS