E9-160n January 1, 2018, Splash City issues $500,000 of 9% bond on the issue dat

Question

E9-160n January 1, 2018, Splash City issues $500,000 of 9% bond on the issue date is 10% and the bonds issued at $457,102. Required s, due in 20 years, with e retirement of 9-7) ( ayable semiannually on June 30 and December 31 each year. The market interest ae 1. Using an amortization schedule, show that the bonds have a carrying value of $458,633 on December 31, 2019. 2. If the market interest rate drops to 7% on December 31, 2019, it will cost S601A52 to retire the bonds. Record the retirement of the bonds on December 31, 2019.

Explanation / Answer

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Period Opening balance-Liability Opening balance-Discount Interest expense debit Cash credit Unamortised discount credit Book value of bonds Closing balance-Discount A B C= A* 5.00% D E=C-D F=A+E G=B-E Jun.30 2018        4,57,102.50              42,897.50        22,855.13     22,500.00               355.13     4,57,457.63          42,542.38 Dec.31 2018        4,57,457.63              42,542.38        22,872.88     22,500.00               372.88     4,57,830.51          42,169.49 Jun.30 2019        4,57,830.51              42,169.49        22,891.53     22,500.00               391.53     4,58,222.03          41,777.97 Dec.31 2019        4,58,222.03              41,777.97        22,911.10     22,500.00               411.10     4,58,633.13          41,366.87

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