7252569-MIdterm-1 (dragged) 33

7252569-MIdterm-1 (dragged) 33 - Interest Interest Face...

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 14-17 ILLUSTRATION 14-3 BONDS PAYABLE—REVIEW PROBLEM Three-year bond with an 8% coupon rate sold to yield 10% on January 1, 2005. Interest payable annually. Callable at 105. Face value: $100,000. Bond issue costs: $5,000. 1. Calculation of premium or discount $100,000(0.75132) = $75,132.00 $ 8,000(2.48685) = 19,894.80 $95,026.80 Discount = $100,000 - $95,026.80 = $4,973.20 2. Recording of bond issuance Cash 90,026.80 Bond Issue Expenses 5,000.00 Bonds Payable 95,026.80 3. Bond Discount Amortization
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Unformatted text preview: Interest Interest Face Carrying Payable Expense Discount Bond Value of Value of (8%) (10%) A m o r t i z a t i o n D i s c o u n t Bonds B o n d s 01/01/05 4,973.20 100,000 95,026.80 12/31/05 8,000 9,502.68 1,502.68 3,470.52 100,000 96,529.48 12/31/06 8,000 9,652.95 1,652.95 1,817.57 100,000 98,182.43 12/31/07 8,000 9,818.24 1,818.24 -0- 100,000 100,000.00 4. Accounting Entries 12/31/05 12/31/06 12/31/07 Interest Expense 9,502.68 9,652.95 9,818.24 Bonds payable 1,502.68 1,652.95 1,818.24 Cash 8,000.00 8,000.00 8,000.00 Bonds Payable 100,000.00 Cash 100,000.00...
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This note was uploaded on 03/28/2012 for the course ACCTG ACC423 taught by Professor Smith during the Spring '10 term at University of Phoenix.

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