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Chapter 08 - Intercompany Indebtedness
E8-3 Bond Sale at Discount
a.
$16,731 = ($25,073.73 + $25,119.36) x 1/3
b.
Journal entries recorded by Wood Corporation:
January 1, 20X4
Cash
16,000
Interest Receivable
16,000
July 1, 20X4
Cash
16,000
Investment in Carter Company Bonds
716
Interest Income
16,716
December 31, 20X4
Interest Receivable
16,000
Investment in Carter Company Bonds
746
Interest Income
16,746
Face Value
of Bonds
PMT #
Interest
$ PMT
Interest
Expense
Amort of
Discount
(Premium)
Premium
(Discount)
Bonds
Payable
BV of
Bonds
600,000.00 1/1/20X3 ($12,000.00) 600,000.00 $588,000.00
Stated rate = 1 7/1/20X3 24,000.00 24,987.98 987.98 ($11,012.02) 600,000.00 $588,987.98
8% 2 1/1/20X4 24,000.00 25,029.96 1,029.96 ($9,982.06) 600,000.00 $590,017.94
Annual 3 7/1/20X4 24,000.00 25,073.73 1,073.73 ($8,908.33) 600,000.00 $591,091.67
Years = 4 1/1/20X5 24,000.00 25,119.36 1,119.36 ($7,788.96) 600,000.00 $592,211.04
5
5 24,000.00 25,166.93 1,166.93 ($6,622.03) 600,000.00 $593,377.97
Mkt Rate = 6 24,000.00 25,216.52 1,216.52 ($5,405.51) 600,000.00 $594,594.49
8.499% 7 24,000.00 25,268.22 1,268.22 ($4,137.29) 600,000.00 $595,862.71
8 24,000.00 25,322.12 1,322.12 ($2,815.17) 600,000.00 $597,184.83
9 24,000.00 25,378.30 1,378.30 ($1,436.87) 600,000.00 $598,563.13
10 24,000.00 25,436.87 1,436.87 ($0.00) 600,000.00 $600,000.00
240,000.00 252,000.00 12,000.00
Discount Example
24 1/1/20X18 18,000.00 18,135.65 135.65 ($953.70) 400,000.00 $399,046.30
25 7/1/20X18 18,000.00 18,141.82 141.82 ($811.88) 400,000.00 $399,188.12
26 1/1/20X19 18,000.00 18,148.27 148.27 ($663.62) 400,000.00 $399,336.38
27
7/1/20X19 18,000.00 18,155.01 155.01 ($508.61) 400,000.00 $399,491.39
28 1/1/20X20 18,000.00 18,162.06 162.06 ($346.55) 400,000.00 $399,653.45
29 7/1/20X20 18,000.00 18,169.42 169.42 ($177.13) 400,000.00 $399,822.87
