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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.
