On January 1, 2015, Loop Raceway issued 510 bonds, each with a face value of $1,

Question

On January 1, 2015, Loop Raceway issued 510 bonds, each with a face value of $1,000, a stated interest rate of 6% paid annually on December 31, and a maturity date of December 31, 2017 On the issue date, the market interest rate was 7 percent, so the total proceeds ftom the bond issue were $496,617 Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year Required: 1. Prepare a bond amortization schedule Changes During the Period Ending Bond Liability Balances Period Ended 01/01/15 12/31/15 12/31/16 12/31/17 Cash Paid Discount Amortized Expense Payable Bonds Interest Bonds Discount Value Payable

Explanation / Answer

TOTAL DISCOUNT = 510,000 - 496,617 = 13383

Under straight line ammortization , Disc amm per yr = 13383/3 = 4461

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Changes during the period Ending bond liability balances Period ended Cash paid Discount ammortized Interest expense Bonds payable Discount on bonds payable Carrying value a b c=a+b d e = b f=d-e 1/1/2015 0 0 0 510000 0 510000 12/31/2015 30600 4461 35061 510000 4461 505539 12/31/2016 30600 4461 35061 505539 4461 501078 12/31/2017 30600 4461 35061 501078 4461 496617

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