Question

  
Q 18 – 20
On January 1, 2020, Drunken Tiger Co. issued $900,000 of 10%, 5-year bonds payable, when the market interest rate is 14%. The bonds pay interest semiannually.
What is the present value of the bonds at issuance? Use present value factor tables below and round to the nearest dollars.
*$773,280
*$558,900
*$1,036,566
*$797,733

What is the interest expense recognized on June 30, 2021? Round to the nearest dollars.
*$84,117
*$55,452
*$127,212
*$10,452
  
What is the carrying amount of the bonds payable at December 31, 2021? Round to the nearest dollars.
*$783,815
*$803,815
*$813,815
*$793,815

Answer 1

1	$773,280
2	*$55,452
3	*$813,815
	Working
	Bond Issue Price = Present value of Bond Face Value and Interest
	Face Value
	$900,000 x PV of $1 7%, 10
	$900,000 x 0.508	$457,200
	Interest
	$45,000 x PVA of $1 7%, 10	$316,080
	$45,000 x 7.024
	Issue Price	$773,280
	Period	Cash paid	Interest Expense	Discount Amortized	Carrying Amount
	Jan 1, 2020				$773,280
	June 30, 2020	$45,000	$54,130	$9,130	$782,410
	Dec 31, 2020	$45,000	$54,769	$9,769	$792,178
	June 30, 2021	$45,000	$55,452	$10,452	$802,631
	Dec 31, 2021	$45,000	$56,184	$11,184	$813,815