Question

An entity issues bonds on December 31, 20x4 with the following characteristics:

Issue price	$7155362
Face value of bonds	$8000000
Yield to maturity	8.13 %
Coupon rate	4.23 %

The bonds pay interest on June 30 and December 31 of each year. What is the balance in the bonds payable account on June 30, 20x5?

Answer 1

Amortization of Discount = Interest Expense - Interest Paid
Amortization of Discount - June 30, 20X5 = ($7,155,362 X 8.13% X 6/12) - ($8,000,000 X 4.23% X6/12)
Amortization of Discount - June 30, 20X5 = $290,865.47 - $169,200
Amortization of Discount - June 30, 20X5 = $121,665.47 or say $121,665 (Approx.)
Discount Balance as on June 30, 20X5 = $844,638 - $121,665
Discount Balance as on June 30, 20X5 = $722,973
Bonds Payable	8,000,000.00
Discount on Issue of Bond	722,973.00
Net Bonds Payable - June 30 20x5	7,277,027.00