31 Dec 11 Bond Interest Expense 39857 815864 97705 12 Premium on Bonds Payable

31 dec 11 bond interest expense 39857 815864 97705 12

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31-Dec-11 Bond Interest Expense 39,857 ($815,864 * 9.7705% * 1/2) Premium on Bonds Payable $143 Interest Expense 40,000 Schedule of Premium Amortization Effective Interest Method (1) (2) (3) (4) (5) Credit Debit Debit Carrying Year Int. Pay Int. Exp Bond Prm Val of Bond (10% of MV) (CV * 9.7705%) (Col 3 - Col 2) (Col 5 previous year - * (6/12) * (6/12) Col 4 of current year) 1-Jan-11 $816,000 Selling 1-Jul-11 $40,000 $39,864 $136 $815,864 price 1-Jan-12 $40,000 $39,857 $143 $815,721 1-Jul-12 $40,000 $39,850 $150 $815,571 1-Jan-13 $40,000 $39,843 $157 $815,413 1-Jul-13 $40,000 $39,835 $165 $815,248
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E14-6 (Amortization Schedules - Straight line) The bonds are dated January 1, 2010, and mature January 1, 2015. Interest is payable annually on January 1. Instructions: Set up a schedule of interest expense and discount amortization under the straight-line method. Schedule of Discount Amortization Straight-Line Method (a) (b) © (d) (e) Credit Debit Credit Carrying Interest Interest Bond Value of Year Payable Expense Discount* Bonds (or cash) (10% of Col (b)+ See below Previous carrying value of maturity Col (d) for calc bond + Col (d) value) 1-Jan-10 $2,783,724 31-Dec-10 $300,000 $343,255.20 $43,255.20 $2,826,979.20 31-Dec-11 $300,000 $343,255.20 $43,255.20 $2,870,234.40 31-Dec-12 $300,000 $343,255.20 $43,255.20 $2,913,489.60 31-Dec-13 $300,000 $343,255.20 $43,255.20 $2,956,744.80 31-Dec-14 $300,000 $343,255.20 $43,255.20 $3,000,000.00 *To calculate the "credit bond discount" column, we take the maturity value of the bond ($3,000,000) less the sale price of the bond ($2,783,724). This amount is $216,276. We then divide this by the life of the bond (2010 - 2015 is 5 years). This amount is $43,255.20. Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724 .
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E14-7 Amortization Schedule - Effective Interest) The bonds are dated January 1, 2010, and mature January 1, 2015. Interest is payable annually on January 1. Instructions Set up a schedule of interest expense and discount amortization under the effective interest method. The effective-interest or yield rate is 12%. It is determined through trial and error using Table 6-2 for the discounted value of the principal ($1,702,290) and Table 6-4 for the discounted value of the interest ($1,081,434); $1,702,290 plus $1,081,434 equals the proceeds of $2,783,724. (A financial calculator may be used to determine the rate of 12%.) Schedule of Discount Amortization Effective Interest Method Credit Debit Credit Carrying Interest Interest Bond Value of Year Payable Payable Discount Bonds (1) (2) (3) (4) (5) Calcs: (10% of MV (Col 5 * 12%) (Col 3 - Col 2) (Col 5 previous year + Col 4 of current year) 1-Jan-10 $2,783,724 given 31-Dec-10 $300,000 $334,046.88 $34,046.88 $2,817,770.88 31-Dec-11 $300,000 $338,132.51 $38,132.51 $2,855,903.39 31-Dec-12 $300,000 $342,708.41 $42,708.41 $2,898,611.79 31-Dec-13 $300,000 $347,833.42 $47,833.42 $2,946,445.21 31-Dec-14 $300,000 $353,554.79 $53,554.79 $3,000,000.00 Rounded amount. Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724 .
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Exercise 14-8 (Determine Proper Amounts in Account Balances) Presented below are three independent situations (a) Chinook Corporation incurred the following costs in connection with the issuance of bonds; (1) printing and engraving costs, $15,000; (2) legal fees, $49,000, and (3) commissions paid to underwriter, $60,000. What amount should be reported as Unamortized Bond Issue Costs, and where should this amount be reported on the balance sheet? Printing and engraving costs of bonds $15,000 Legal fees 49,000 Commissions paid to underwriter 60,000 Amount to be reported as Unamortized Bond Issue Costs $124,000 The Unamortized Bond Issue Costs, $124,000, should be reported as a deferred charge in the Other Assets section on the balance sheet.
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