Question

# On January 1, Year 1, Hart Company issued bonds with a face value of \$103,000, a...

On January 1, Year 1, Hart Company issued bonds with a face value of \$103,000, a stated rate of interest of 10 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 9 percent at the time the bonds were issued. The bonds sold for \$107,006. Hart used the effective interest rate method to amortize the bond premium. (Round your intermediate calculations and final answers to the nearest whole number.)

Required:

a. Prepare an amortization table.

 Date Cash Payment Interest Expense Premium Amortization Carrying Value January 1, Year 1 107,006 December 31, Year 1 10,300 9,631 669 106,337 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals

b. What is the carrying value that would appear on the Year 4 balance sheet?
c. What is the interest expense that would appear on the Year 4 income statement?
d. What is the amount of cash outflow for interest that would appear in the operating activities section of the Year 4 statement of cash flows?

 b. Carrying Value on the Year 4 c. Interest Expense for Year 4 d. Cash Outflow for interest in Year 4

 a) Date Cash Payment Interest Expense Premium Amortization Carrying Value January 1, Year 1 107,006 December 31, Year 1 10,300 9,631 669 106,337 December 31, Year 2 10,300 9,570 730 105,607 December 31, Year 3 10,300 9,505 795 104,811 December 31, Year 4 10,300 9,433 867 103,944 December 31, Year 5 10,300 9,356 944 103,000 b. Carrying Value on the Year 4 103,944 c. Interest Expense for Year 4 9,433 d. Cash Outflow for interest in Year 4 10,300