On January 1, 2012, Loop Raceway issued 590 bonds, each with a face value of $1,

Question

On January 1, 2012, Loop Raceway issued 590 bonds, each with a face value of $1,000, a stated interest rate of 7% paid annually on December 31, and a maturity date of December 31, 2014. On the issue date, the market interest rate was 8 percent, so the total proceeds from the bond issue were $574,776. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Complete the required journal entries to record the bond issue, interest payments on December 31, 2012 and 2013, bond retirement. Assume the bonds are retired on January 1, 2014, at a price of 99. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

for question 1 theres a table and need to calculate discount amortized and discounts on bonds payable for period

1/1/12, 12/31/12, 12/31/13, 12/31/14

and for question 2,3,4,5 need journal entries proper one

please help

On January 1, 2012, Loop Raceway issued 590 bonds, each with a face value of $1,000, a stated interest rate of 7% paid annually on December 31, and a maturity date of December 31, 2014. On the issue date, the market interest rate was 8 percent, so the total proceeds from the bond issue were $574,776. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Explanation / Answer

the cash paid is the face value multiplied by the stated interest rate.
Face value: $650,000 ($1,000X 650 bonds) X 7%= 45,500 (this amount is the same for all the periods, because the interest paid is the same. Interest expense is different (i.e. the expense shown on the books).
Interest expense is the carrying amount on the chart multiplied by the market interest rate of 8%.

So for the end of year one of the bond being outstanding,

We would have cash paid of $45,500 (same for every year). Whats important to notice here is that we are not using the effective interest rate method, but straight-line, so each year we amortize 5591 (estimate) per year in discount and add it to the carrying value of the bond. $5,591 comes from taking the discount of 16772/3 years straight line amortization.
So the new carrying value at the end of the year is $633,228+$5,591= $638,819
In interest expense is the cash paid of $45,500 + the S.L. amortized discount of $5,591= $638,819
I you can use the same logic to answer for the rest of the years.

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