Problem 10-1B (Concluded)
Part 3
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value ……………..
B.1
0.5083
$90,000
$45,747
Interest (annuity) ….
B.3
7.0236
5,400
37,927
Price of bonds ……..
$83,674
Bond discount ……..
$ 6,326
* Table values are based on a discount rate of 7% (half the annual market rate)
and 10 periods (semiannual payments).
b.
2015
Jan. 1
Cash ……………………………………………………....
83,674
Discount on Bonds Payable …………………..………
6,326
Bonds Payable …………………………………………………
90,000
Sold bonds on stated issue date.
Problem 10-2B (40 minutes)
Part 1
2015
Jan. 1
Cash ……………………………………………………....
3,010,000
Discount on Bonds Payable …………………..………
390,000
Bonds Payable …………………………………………………
3,400,000
Sold bonds on stated issue date.
Part 2
[Note: The semiannual amounts for (a), (b), and (c) below are the same throughout
the bonds’ life because the company uses straight-line amortization.]
Problem 10-4B (Concluded)
Part 3
2015
June 30
Bond Interest Expense …………………………..
13,101
Premium on Bonds Payable ………………….……….
1,299
Cash ……………………………………………….………
14,400
To record six months’ interest and
premium amortization.
2015
Dec. 31
Bond Interest Expense …………………………..
13,101
Premium on Bonds Payable ………………….……….
1,299
Cash ……………………………………………….………
14,400
To record six months’ interest and
premium amortization.
