Question

On January 1, 2021, a company issues $750,000 of 8% bonds, due in twelve years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 9%, the bonds will issue at $695,641.

Required:
1. Fill in the blanks in the amortization schedule below: (Round your answers to the nearest dollar amount. Enter all amounts as positive values.)

2. Record the bond issue on January 1, 2021, and the first two semi-annual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest dollar amount.)

Answer 1

1) Use the PV function in Excel to calculate the issue price of the bonds
Face Value	$                   750,000.00
Semiannual Coupon Rate = 8%/2	4%
Semiannual Coupon payment	$                     30,000.00
Period	24
Rate = 9%/2	4.50%
Current Price = PV(4.5%,24,-30000,-750000)	$                        695,642
	Amortization Table
A	B	C	D	E
Semiannual interest Rate	Interest Payment	Interest Expense = 4.5% x prev. year carrying Amt	Discount Amortization (C - B)	Discount Account Balance E -D	Bond Carrying Amount 750000-E
1/1/21				$            54,358	$             695,642
6/30/21	$                          30,000	$                    31,304	$            1,304	$            53,054	$             696,946
12/31/21	$                          30,000	$                    31,363	$            1,363	$            51,692	$             698,308
6/30/22	$                          30,000	$                    31,424	$            1,424	$            50,268	$             699,732
12/31/22	$                          30,000	$                    31,488	$            1,488	$            48,780	$             701,220
6/30/23	$                          30,000	$                    31,555	$            1,555	$            47,225	$             702,775
12/31/23	$                          30,000	$                    31,625	$            1,625	$            45,600	$             704,400
6/30/24	$                          30,000	$                    31,698	$            1,698	$            43,902	$             706,098
12/31/24	$                          30,000	$                    31,774	$            1,774	$            42,128	$             707,872
6/30/25	$                          30,000	$                    31,854	$            1,854	$            40,273	$             709,727
12/31/25	$                          30,000	$                    31,938	$            1,938	$            38,336	$             711,664
6/30/26	$                          30,000	$                    32,025	$            2,025	$            36,311	$             713,689
12/31/26	$                          30,000	$                    32,116	$            2,116	$            34,195	$             715,805
6/30/27	$                          30,000	$                    32,211	$            2,211	$            31,983	$             718,017
12/31/27	$                          30,000	$                    32,311	$            2,311	$            29,673	$             720,327
6/30/28	$                          30,000	$                    32,415	$            2,415	$            27,258	$             722,742
12/31/28	$                          30,000	$                    32,523	$            2,523	$            24,735	$             725,265
6/30/29	$                          30,000	$                    32,637	$            2,637	$            22,098	$             727,902
12/31/29	$                          30,000	$                    32,756	$            2,756	$            19,342	$             730,658
6/30/30	$                          30,000	$                    32,880	$            2,880	$            16,462	$             733,538
12/31/30	$                          30,000	$                    33,009	$            3,009	$            13,453	$             736,547
6/30/31	$                          30,000	$                    33,145	$            3,145	$            10,309	$             739,691
12/31/31	$                          30,000	$                    33,286	$            3,286	$              7,023	$             742,977
6/30/32	$                          30,000	$                    33,434	$            3,434	$              3,589	$             746,411
12/31/32	$                          30,000	$                    33,589	$            3,589	$                     0	$             750,000
2)
Accounts & Titles	Debit	Credit
a) on Jan1, 2021
Cash	$                        695,642
Discount on Bonds Payable	$                          54,358
Bonds Payable		$                  750,000
b) on June 30, 2021
Interest Expense	$                          31,304
Discount on Bonds Payable		$                      1,304
Cash		$                    30,000
c) on Dec 31, 2021
Interest Expense	$                          31,363
Discount on Bonds Payable		$                      1,363
Cash		$                    30,000