Chapter 10 – Reporting and Analyzing Long-Term Liabilities
Problem 10-6B (60 minutes)
Part 1
2013
Jan. 1
Cash …………………………………………………….…
198,494
Discount on Bonds Payable ………………….……….
41,506
Bonds Payable ………………………………..……………….
240,000
Sold bonds on stated issue date.
Part 2
Thirty payments of $7,200* ……………..…….
$ 216,000
Par value at maturity ……………………..……
240,000
Total repaid ………………………………………….
456,000
Less amount borrowed ………………….…….
(198,494)
Total bond interest expense …………..…….
$ 257,506
$240,000 x 0.06 x ½ = $7,200
or:
Thirty payments of $7,200* …………….…….
$ 216,000
Plus discount ………………………………..…….
41,506
Total bond interest expense …………..…….
$ 257,506
* Semiannual interest payment, computed as $240,000 x 6% x ½ year.
Part 3 Straight-line amortization table ($41,506/30= $1,384)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2013
$41,506
$ 198,494
6/30/2013
40,122
199,878
12/31/2013
38,738
201,262
6/30/2014
37,354
202,646
12/31/2014
35,970
204,030
