Requirement 3- Journalize the first interest payment on June 30 and amortize the

Question

Requirement 3- Journalize the first interest payment on June 30 and amortize the premium or discount using the straight-line amortization method Homework: Chapter 12 Homework MyLa Score: 0.59 of 10 pts Hw Score: 67.26%, 6726 of 100 pts CP12-45 Continuing Problem (similar to) January 1, 2017 The Do pay interest seminnualy on June 30 and Decenber 31 On January 1, 2017, the market rae of interest requied by investors for similar bonds is (Click the icon to view the Present Valu of $1 sable)(Clk the to vew the Presnt Vislue of Annulity of $1 table) Take Read the reurts Requirement 1 Wil Dorneay's bonds at face a prenwr" or a discoun Requirement 2 Calouiate and recond the cash recived on the bond issue date Begin by calodating he cash rocelived on the boand isaue date (hbies pevided wih tactors munded to evee decimal cesRound al uncy amounts to the nearest whole dllar Upon issuanoe of the bonds on January 1, Donnelly wil receive cash of Enter your answer in the answer box and then click Check Answer 2 remaining

Explanation / Answer

Req 2: Issue Price: Present value of interest payment of $ 31,500 for 14 periods discounted at 5% (annuity factor is 9.8986) 311805.9 Present value of maturity amount of $ 900,000 at the end of Period-14(PV factor of period-14 i.e.0.5051) 454590 ISSUE PRICE: 766396 Journal Entry: Cash Account Account Dr. 766,396 Discount on Bonds payable Dr. (900,000-766396) 133,604       Bonds payable 900,000 Req 3: Semi annual interest: Par value ofbonds 900,000 Interest rate 0 Interest (900,000*7%*6/12) 31500 Total discount 133,604 Number of interest periods 14 Discount amortized in each period 9543.143 Journal entry of First intererst payment: Interest expense Dr. 41043       Cash Account 31500        Discount on bonds payable 9543

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