Question

Ayayai Company sells 10% bonds having a maturity value of $1,400,000 for $1,299,071. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.

Set up a schedule of interest expense and discount amortization
under the straight-line method. (Round answers to 0 decimal places,
e.g. 38,548.)

Schedule of Discount Amortization

Straight-Line Method

Year

Cash

Paid

Interest

Expense

Discount

Amortized

Carrying

Amount of Bonds

Jan. 1, 2017 $

Jan. 1, 2018

Jan. 1, 2019

Jan. 1, 2020

Jan. 1, 2021

Jan. 1, 2022

Answer #1

Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to 0 decimal places, e.g. 38,548.)

Schedule of Discount Amortization

Straight-Line Method

Year | Cash paid | Interst expense | Discount amortized | Carrying amount on bonds |

Jan 1,2017 | 1299071 | |||

Jan 1,2018 | 140000 | 140000+20186 = 160186 | 20186 | 1319257 |

Jan 1,2019 | 140000 | 160186 | 20186 | 1339443 |

Jan 1,2020 | 140000 | 160186 | 20186 | 1359629 |

Jan 1,2021 | 140000 | 160186 | 20186 | 1379815 |

Jan 1,2022 | 140000 | 160185 | 20185 | 1400000 |

Discount amortized = 100929/5 = 20186

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(Round intermediate calculations to 6 decimal places,
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mature January 1, 2022. Interest is payable annually on January
1.
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The effective-interest rate _______%
b) Set up a schedule of interest expense and
discount amortization under the effective-interest method.
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Year
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The effective-interest rate
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Prepare the journal entry at the date of the bond issuance.
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