Question

On December​ 31,2020​,Mobbs Corp. issues 11 ​percent, 10-year convertible bonds with a maturity value of $5,500,000....

On December​ 31,2020​,Mobbs Corp. issues 11 ​percent, 10-year convertible bonds with a maturity value of $5,500,000. The​ semi-annual interest dates are June 30 and December 31. The market interest rate is 12 ​percent, and the issue price of the bonds is 93.5636364. Mobbs Corp. amortizes bond premium and discount by the​ effective-interest method.Required

Requirement 1. Prepare an​ effective-interest method amortization table for the first four​ semi-annual interest periods. ​(Round your answers to the nearest​ dollar.)

Mobbs Corp.

Amortization Table

A

B

C

D

E

Interest

Interest Expense

Unamortized

Payment

(6.0% of

Discount

Discount Account

Bond Carrying

Semi-annual

(5.5% of

Preceding Bond

Amortization

Balance

Amount

Interest Period

Maturity Values)

Carrying Amount)

(B – A)

(D – C)

($5,500,000 – D)

Dec 31, 2020 ______________. _____________

Business   Accounting   
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Answer #1

Here Bond issued at discount.

Bond face value 5500000
Bond issue price

5500000*93.5636364% =5146000
Discount to be amortized 5500000 - 5146000 = 354000
Coupen rate 11% (5.5% semi annual)
market rate 12% (6% semi annual)
Amortization Table
Date Interest payment (face value * 5.5%) A Interest expense (previous book value*6%) (F*6%) Amortization of bond discount (B-A) (C) Unamortized Discount account balance (D-C)(D) Bond face value(E) Book Value/Carrying value (E-D) (F)
31.12.2020 354000.00 5500000 5146000.00
30.6.2021 302500 308760 6260 347740.00 5500000 5152260.00
31.12.2021 302500 309136 6636 341104.40 5500000 5158895.60
30.6.2022 302500 309534 7034 334070.66 5500000 5165929.34
31.12.2022 302500 309956 7456 326614.90 5500000 5173385.10
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