10.10A Part B I need help with part b. On January 1, 2014, Lock Corporation issu

Question

10.10A Part B

I need help with part b.

On January 1, 2014, Lock Corporation issued $1,690,000 face value, 7%, 10- year bonds at $1,473,083. This price resulted in an effective-interest rate of 9% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest January 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2014. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Prepare an amortization table through December 31, 2016 (three interest periods) for this bond issue. (Round answers to 0 decimal places, e.g. 125.)

Explanation / Answer

b

Schedule of Bond Discount Amortization

Effective Interest Method

7% Bonds Sold to Yield 8%

Date

Interest to be paid

Interest Expense

Discount Amortization

Unamortized discount

Carrying Value of Bonds

Issue date

$               216,917.00

$ 1,473,083

1

$                    135,200.00

$ 103,116

$                   32,084.19

$               184,832.81

1,505,167

2

$                    135,200.00

120,413

$                   14,786.62

$               170,046.19

1,519,954

3

$                    135,200.00

121,596

$                   13,603.69

$               156,442.49

1,533,558

annual discount amortization $       21,691.70 annual cash interest payment $     135,200.00 annual interest expense $ 103,115.81

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