Shuttle Company issued $1,750,000, three-year, 5 percent bonds on January 1, 201

Question

Shuttle Company issued $1,750,000, three-year, 5 percent bonds on January 1, 2017. The bond interest is paid each December 31, the end of the company’s fiscal year. The bond was sold to yield 4 percent. Use Table 9C.1, Table 9C.2 (Round time value factor to 4 decimal places.)

Shuttle Company issued $1,750,000, three-year, 5 percent bonds on January 1, 2017. The bond interest is paid each December 31, the end of the company’s fiscal year. The bond was sold to yield 4 percent. Use Table 9C.1, Table 9C.2 (Round time value factor to 4 decimal places.)

Shuttle Company issued $1,750,000, three-year, 5 percent bonds on January 1, 2017. The bond interest is paid each December 31, the end of the company's fiscal year. The bond was sold to yield 4 percent. Use Table 9C.1, Table 9C.2 (Round time value factor to 4 decimal places.) Required: 1. Complete a bond payment schedule. Use the effective-interest method. (Make sure that the unamortized discount/premium equals to '0' and the Net Liability equals to face value of the bond in the last period. Interest expense in the last period should be calculated as Cash Interest (+) discount l (-) premium amortized. Round intermediate and final answers to the nearest whole dollar.) Bond Payment Schedule Cash Payment Interest Amortization Carrying of Premium Date Expense Amount 1/1/2017 12/31/2017 12/31/2018 12/31/2019 2. What amounts will be reported on the financial statements (statement of financial position, statement of earnings, and statement of cash flows) for 2017, 2018, and 2019? (Round intermediate and final answers to the nearest whole dollar.) 2017 2018 2019 Interest expense Bonds payable Interest payment Issuance of bonds Payment of bonds

Explanation / Answer

1 Carrying value Interest expense Maturity value 87500 1750000 Year 1-3 PV annuity i=4% 2.77509 0.889 Year 3 PV$1 i=4% 242820 1555750 Total 1798570 2 Effective interest method 5% 4% Year Cash paid Interest expense Premium amortized Carrying amount 01-01-2017 1798570 31-12-2017 87500 71943 15557 1783013 31-12-2018 87500 71321 16179 1766834 31-12-2019 87500 70666 16834 1750000 Year 1 Year 2 Year 3 Interest expense 71943 71321 70666 Bonds payable 1783013 1766834 1750000 Interest payment -87500 -87500 -87500 Issue of bond 1750000 payment of bond -1750000

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