Question

Berj Corporation issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2017. The coupon rate was payable at the end of each year. The bonds mature at the end of four years. The following schedule has been partially completed (amounts in thousands):

	Cash Paid			Interest Expense			Amortization			Carrying Amount
January 1, 2017 (issuance)										$	6,915
End of year 2017	$	510		$	484		$	26			6,889
End of year 2018		510			?			?			6,861
End of year 2019		510			?			?			?
End of year 2020		510			?			?			6,800

  

Required:
1.	Complete the amortization schedule. (Make sure that the unamortized discount/premium equals to '0' and the Net Liability equals to face value of the bond in the last period. Enter your answers in thousands of dollars. Round intermediate calculations and final answers to the nearest whole dollars. Enter all amounts as positive values.)

      

2.	What was the maturity amount of the bonds? (Enter your answer in thousands of dollars.)

      

3.	How much cash was received at the date of issuance (sale) of the bonds? (Enter your answer in thousands of dollars.)

      

4.	What was the amount of discount or premium on the bond? (Enter your answer in thousands of dollars.)

      

5.	How much cash will be disbursed in total for the full life of the bond issue? (Enter your answer in thousands of dollars.)

      

6.

What method of amortization is being used?

	Effective-interest method
	Straight-line method
	Deferred interest method

   

7.	What is the coupon rate of interest? (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).)

      

8.	What is the effective rate of interest? (Round percentage answer to the nearest whole number.)

      

9.	What amount of interest expense should be reported on the statement of earnings each year? (Enter your answers in thousands of dollars.)

      

10.	Show how the bonds should be reported on the statement of financial position at the end of each year (show the last year immediately before repayment of the bonds).  (Enter your answers in thousands of dollars.)

      

Answer 1