Captain Johnny issued 4%, 10 year bonds payable at 85 on December 31, 2010. At D

Q: Captain Johnny issued 4%, 10 year bonds payable at 85 on December 31, 2010. At D

Maturity value =300,000 ================ 264,000 CV Dec 2013 Annual interest paid = 300,000 x 4% = 12,000 ========= Annual interest expense = 12,000 + 4,500 = 16,500 DR Interest expense 8,250 6,000 CR Bond Discount 2,250 CR cash 6,000 CR Bond Discount 2,250 CV Dec 2014 - 300,000 - 31,500 = 268,500

ID: 2355482 • Letter: C

Question

Captain Johnny issued 4%, 10 year bonds payable at 85 on December 31, 2010. At December 31, 2012, Captain Johnny reported the bonds payable as follow: Bond payable $300,000, less: discount (36,000)= $264,000. Captain Johnny uses the straight line amortization method and pays semiannual interest each June 30 and December 31. REQUIREMENTS: 1.answer the following questions; (a) What is the maturity value of the bonds? (b) What is the carrying amount of the bonds at December 31, 2012. (c) what is the annual cash interest payment on the bonds? (d) how much interest expense should the company record each year? 2. Record the June 30, 2013 semiannual interest payment and amortization of discount. 3) What will be the carrying amount of the bonds at December 31, 2013.

Explanation / Answer

Maturity value =300,000

================
264,000 CV Dec 2013
Annual interest paid =

300,000 x 4% = 12,000

=========

Annual interest expense = 12,000 + 4,500 = 16,500

DR Interest expense 8,250

6,000 CR

Bond Discount 2,250

CR cash 6,000

CR Bond Discount 2,250

CV Dec 2014 - 300,000 - 31,500 = 268,500

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Captain Johnny issued 4%, 10 year bonds payable at 85 on December 31, 2010. At D

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Captain Johnny issued 4%, 10 year bonds payable at 85 on December 31, 2010. At D

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