Pad . * 55% - . 3:35 PM ? edugen.wileyplus.com MESSAGE MY INSTRUCTOR STANDARD VI

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Pad . * 55% - . 3:35 PM ? edugen.wileyplus.com MESSAGE MY INSTRUCTOR STANDARD VIEW PRINTER VERSION NEXT ASSIGNMENT RESOURCES Exercise 10-14 Tarawa Limited issued $1,340,000 of 10-year, 5% bonds on January 1, 2018, when the market interest rate was 6% Tarawa received $1,240,326 when the bonds were issued. Interest is payable semi-annually on July 1 and January 1 Tarawa has a December 31 year end HW Chapter 10 xercise 10-14 Record the issue of the bonds on January 1. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Problem 10-10A (Par Date Account Titles and Explanation Debit Credit an. Review Scor Review Results by Study Objective SHOW LIST OF ACCOUNTS LINK TO TEXT Record the payment of interest on July 1. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July l SHOW LIST OF ACCOUNTS LINK TO TEXT

Explanation / Answer

Answer: Date Journal Entry Debit Credit 1-Jan Cash $                   1,240,326.00 Discount on bonds payable $                         99,674.00 (1340000-1240326) Bonds Payable $       1,340,000.00 (To record issue of bonds) 1-Jul Interest Expense $                         37,209.78 (1,240,326*3%) Discount on bonds payable $               3,709.78 (37,209.78-33,500) Cash $             33,500.00 (1,340,000*2.5%) (To record payment of interest on July 1) 31-Dec Interest Expense $                         37,321.07 (1,240,326+3,709.78)*3% Discount on bonds payable $               3,821.07 (38,326.07-33,500) Cash $             33,500.00 (1,340,000*2.5%) (To record payment of interest on Dec 31) Bonds present value (issue price) on January 1, 2008 $1,240,320.92 (=pv(rate,nper,pmt,fv,type) (=pv(3%,20,-33,500,-1340,000,0) Present value of the bonds $                   1,247,856.85 Schedule of amortization of discount Year Interest Payable (1340,000*2.5%) Interest Expense (beginning carrying value*3%) Discount on bonds payable (Interest expense-Interest payable) Carrying Value (Beginning Carrying Value+Discount on bonds payable) 0 $                             1,240,326.00 1 33500 $                         37,209.78 $               3,709.78 $                             1,244,035.78 2 33500 $                         37,321.07 $               3,821.07 $                             1,247,856.85

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