than V Bonds sell at a discount when the market rate of terest is greater t v th

Question

than V Bonds sell at a discount when the market rate of terest is greater t v the contract rate of interest. Discount amortization is added t ? the amount of a ter pa causing the amount of terest expense e ted the income statement to be greater than the amount of semi-annual cash interest paid on a bond. On January 1, 2014, Jack Company issues $4,575,000, 9%, 10-year bonds for cash of $4,028 274 when the market rate o interest s 11%. The bonds pay nterest sem annually on June 30 and December 31 Determine 1) the discount on bonds payable at the date of issuance, (2) the semi-annual cash interest payment, (3) the semi-annual discount amortization using the straight line method, and (4) the semi-annual interest expense. Round your answers to the nearest whole dollar amount Selling Price of Bond:s Face Value of Bonds Discount on Bonds Payable Cash interest payment Discount amortization Interest expense Check My Wark Using the straight line method, the bond discount is amortized over the number of semi-annual interest periods in the bond's life. Recording in the Accounting System Journalize the first interest payment and the amortization of the bond discount on June 30, 2014 Round your answers to the nearest whole dollar amount. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Y Cash Foedbadik Y Check My Work Using the straight line method, bond discount amortization is added to the cash interest paid to determine the amount of interest expense reported on the income statement.

Explanation / Answer

Financial Statement Impact

1.

2.

d. Interest Expenses Will be same in case of straight line amortization of Bond Discount.

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Selling Price of Bond $              4,028,274 Face Value of Bond $              4,575,000 Discount on Issue of Bond $                  546,726

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