Connect Homework Chapter 14 Acct 302.docx

# Connect Homework Chapter 14 Acct 302.docx - CONNECT...

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Period-End Cash Interest Paid Bond Interest Expense Discount Amortization Carrying Value January 1 \$73,459,316 June 30 \$1,200,000 \$1,469,186 \$269,186 73,728,502 December 31 1,200,000 1,474,570 274,570 74,003,072 Total \$2,943,756 Explanation Interest will be the effective rate times the outstanding (book value) balance: Date General Journal Debit Credit June 30 Interest expense (2% × \$73,459,316) 1,469,186 Discount on bonds payable (difference) 269,186 Cash (1.5% × \$80,000,000) 1,200,00 0 Dec. 31 Interest expense (2% × [\$73,459,316 + \$269,186]) 1,474,570 Discount on bonds payable (difference) 274,570 Cash (1.5% × \$80,000,000) 1,200,00 0 Interest expense for the year: \$1,469,186 + \$1,474,570 = \$2,943,756 4. When Patey Pontoons issued 6% bonds on January 1, 2018, with a face amount of \$760,000, the market yield for bonds of similar risk and maturity was 11%. The bonds mature December 31, 2021 (4 years). Interest is paid semiannually on June 30 and December 31. (FV of \$1, PV of \$1, FVA of \$1, PVA of \$1, FVAD of \$1 and PVAD of \$1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2018.
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