On January 1, 2018, Ripstick Park issues $780,000 of 6% bonds, due in ten years,

Question

On January 1, 2018, Ripstick Park issues $780,000 of 6% bonds, due in ten years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 7%, the bonds will issue at $724,571. 1.

1.) Complete the first three rows of an amortization table through December 31, 2018. (Round your answers to the nearest dollar amount. Enter all amounts as positive values.) 2.

2.) Record the bond issue on January 1, 2018, and the first two semi-annual interest payments on June 30, 2018, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest dollar amount.)

Explanation / Answer

a. Bond Amortisation Schedule Period Cash Paid (b) Interest Expense@ 3.5% (c=a*3.5%) Increase in Carrying Value(d=c-b) Carrying Value of Bond (a) Jan-18 $724,571 Jun-18 $23,400 $25,359.99 $1,960 $726,531 Dec-18 $23,400 $25,428.58 $2,029 $728,560 b. Journal Entry Date Details Debit Credit 01/01/2018 Cash 780000 Bonds payable 780000 To Record Issuance of Bond 30/06/2018 Interest expense $23,400        To cash ($780000*6%*1/2) $23,400 To record Interest Payment 31/12/2018 Interest Expense $23,400         To Cash** $23,400 To Record Interest Payment ** Assume that Cash payment made for Interest

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