Question

On January 1, 2018, Splash City issues $360,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.

Assuming the market interest rate on the issue date is 8%, the bonds will issue at $335,537.

1. Complete the first three rows of an amortization table.

Date	Cash Paid	Interest Expense	Increase in carrying value	carrying value
1/1/18
6/30/18
12/31/18

2. Record the bond issue on January 1, 2018, and the first two semiannual interest payments on June 30, 2018, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Date	Cash Paid*	Interest Exp#	Increase in carrying value@	Carrying Value
01-01-18	0	0	0	335537
30-06-18	12600	13421.48	821.48	336358.48
31-12-18	12600	13454.3392	854.3392	337212.8192
*	`=360000*7%/2
#	`=335537*8%/2, 336358*8%/2
@	`=336358-335537, 337212-336358
2. Journal Entry
01-01-18	Bank A/c Dr	335537
	Disc on Bond Payable	24463
	to Bond A/c		360000
30-06-18	Interst Expenses	13421
	to Disc on Bond Payable		821
	to Cash		12600
31-12-18	Interst Expenses	13454
	to Disc on Bond Payable		854
	to Cash		12600