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The Square Foot Grill, Inc. issued $167,000 of 10-year, 8 percent bonds on January 1, 2018,...

The Square Foot Grill, Inc. issued $167,000 of 10-year, 8 percent bonds on January 1, 2018, at 102. interest is payable in cash annually on December 31. The straight-line method is used for amortization.

a. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2018.

b. Determine the amount of interest expense reported on the 2018 income statement.

c. Determine the carrying value of the bond liability as of December 31, 2019.

d. Determine the amount of interest expense reported on the 2019 income statement.

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Answer #1

Issue Price =167000*1.02 =$170,340

Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2018.

Carrying Value = Isued Price - Discount Amortized

Discount =3340

Discount Amortized Per Year =3340/10 =334

Carrying Value = $170,340-340 =$170,000

b. Determine the amount of interest expense reported on the 2018 income statement.

Interest Expense =Coupon Payment Less Discount Amortized Per Year

=$167,000*8% - $340

=$13020

c. Determine the carrying value of the bond liability as of December 31, 2019.

Carrying at the Beginning of 2019 Less Discount Amortized

=$170,000-340

=$169660

. Determine the amount of interest expense reported on the 2019 income statement.

Interest Expense =Coupon Payment Less Discount Amortized Per Year

=$167,000*8% - $340

=$13020

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