Exercise Completing a Bond Amortization Table (Effective Interest Rate Method
MacBride Enterprises sold S200,000 of bonds on January 1, 2020. 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 |
Carrying Value |
At issue |
S6-457 |
52(16,457 |
|||
06/30/20 |
$9,000 |
$8,465 |
$535 |
5,922 |
205,922 |
12/31/20 |
9,000 |
8,443 |
557 |
5,365 |
205,365 |
06/30/21 |
9,000 |
8,420 |
580 |
4,785 |
204,785 |
12/31/21 |
? |
? |
? |
? |
? |
Required:
4.Determine when the bonds will mature.
Use the following information for Exercises 9-83 and 9-84:
Dandy Candy bought a delivery vehicle for S45,000 by issuing an 8% installment note on January 1, 2021. Dandy will make 12 monthly payments of $3,914.50 at the end of each month.
(a)
Introduction:
As per the effective interest rate method, a constant interest rate on book or carrying value is assigned to each period.
To calculate:
Stated rate of interest on bonds.
Given:
$200,000 were issued on 1st January 2020 and portion of amortization table:
Annual Period | Cash Payment (Credit) | Interest Expense (Debit) | Premium on Bonds Payable (Debit) | Premium on Bonds Payable Balance | Carrying Value |
At issue | 6,457 | 206,457 | |||
06/30/2020 | 9,000 | 8,465 | 535 | 5,922 | 205,922 |
12/31/2020 | 9,000 | 8,443 | 557 | 5,365 | 205,365 |
06/30/2021 | 9,000 | 8,420 | 580 | 4,785 | 204,785 |
12/31/2021 | ? | ? | ? |
(b)
Introduction:
A Bond is long term liability wherein the issuer is entitled to pay the face value of the Bond at the time of maturity and make interest payments periodically. It is a breakdown of large debt to borrow as it may be too large for an individual lender.
To calculate:
The Effective annual interest rate on bonds.
(c)
Introduction:
A Bond is long term liability wherein the issuer is entitled to pay the face value of the Bond at the time of maturity and make interest payments periodically. It is a breakdown of large debt to borrow as it may be too large for an individual lender.
To calculate:
The interest expense and premium amortized for period ending on 31st Dec 2021.
(d)
Introduction:
A Bond is long term liability wherein the issuer is entitled to pay the face value of the Bond at the time of maturity and make interest payments periodically. It is a breakdown of large debt to borrow as it may be too large for an individual lender.
To find:
Maturity date of the bonds.
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