On January 1, 2016, Parker Company issued bonds with a face value of $58,000, a
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Question
On January 1, 2016, Parker Company issued bonds with a face value of $58,000, a stated rate of interest of 7 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. Thee effective rate of interest was 9 percent at the time the bonds were issued. The bonds sold for $53,488 Parker used the effective interest rate method to amortize the bond discount. (Round your intermediate calculations and final answers to the nearest whole dollar amount.) Required a. Prepare an amortization table Cash Payment Expense Amortization Carrying Value Interest Discount Date January 1, 2016 December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 Totals 53,488 4,060 4,814 754 54,242 b. What is the carrying value that would appear on the 2019 balance sheet? Carrying value c. What is the interest expense that would appear on the 2019 income statement? Interest expense d. What is the amount of cash outflow for interest that would appear in the operating activities section of the 2019 statement of cash flows? Cash outflow for interestExplanation / Answer
Answer 1-A. Discount Amortization Schedule Date Interest Paid - $53,000 X 7% Interest Expense - Preceeding Bond Carrying Value X 9% Discount Amortization Unamortized Discount Bonds Carrying Amount A B C = B - A D = D - C E = $58,000 - D 1-Jan-16 - - - 4,512 53,488 31-Dec-16 4,060 4,814 754 3,758 54,242 31-Dec-17 4,060 4,882 822 2,936 55,064 31-Dec-18 4,060 4,956 896 2,040 55,960 31-Dec-19 4,060 5,036 976 1,064 56,936 31-Dec-20 4,060 5,124 1,064 (0) 58,000 Totals 20,300 24,812 4,512 Answer 1-B Bonds Carrying Value - Dec 31, 2019 56,936 Answer 1-C. Interest Expense - 2019 Income Statement 5,036 Answer 1-D. Cash Outflow of Interest - 2019 4,060
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