I need help answering this question On April 30, 2017, Smokey Inc. issues a $100

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I need help answering this question

On April 30, 2017, Smokey Inc. issues a $100,000 10-year 7% bond. The market rate of interest is 6%. Because the market rate is lower than the bond rate, the bonds issue at a premium. The bond quote is: 107.439. The bonds pay interest semi-annually on October 31 and April 30. The company's fiscal-year end is December 31 Required a.) Prepare a bond amortization schedule for the issuance and the first three interest periods. b.) Record the journal entry required on: i. The issuance of the bond. (April 30, 2017) ii. The first interest payment. (October 31, 2017) iii. The company's fiscal year-end. (December 31, 2017) iv. The second interest payment. (April 30, 2018)

Explanation / Answer

Issue price: 100000*107.439/100= 107439

Premium = 107439-100000=7439

Semiannual interest = 100000*.07*6/12=3500

a)

b)

**The amortisation data for second period from amortisation table is to be distributed between 2months (1 nov-31dec] and 4 months [1jan2018-30april2018]

Bond Amortisation schedule Date Beginning carrying value Interest paid Interest expense premium Amortised carrying value at end April30 2017 107439 Oct 31 2017 107439 3500 3223.17   [107439*.03] 276.83   [3500-3223.17 107162.12   [107439-276.83] April 302018 107162.12 3500 3214.87   [107162.12*.03] 285.13    [3500-3214.87] 106876.99   [107162.12-285.13] oct 31 2018 106876.99 3500 3206.31 293.69 106583.30

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