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Cornerstone Exercise 9-27 (Algorithmic) Debt Issued at a Discount (Straight Line) On January 1, 2020, Drew...

Cornerstone Exercise 9-27 (Algorithmic) Debt Issued at a Discount (Straight Line) On January 1, 2020, Drew Company issued $1,250,000, 5-year bonds for $1,200,000. The stated rate of interest was 6% and interest is paid annually on December 31. Required: Prepare the amortization table for Drew Company's bonds. If an amount box does not require an entry, leave it blank and if the answer is zero, enter "0". Drew Company Amortization Table Period Cash Payment (Credit) Interest Expense (Debit) Discount on Bonds Payable (Credit) Discount on Bonds Payable Balance Carrying Value At issue $ $ $ $ $ 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24

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Answer #1

Prepare the amortization table for Drew Company's bonds.

Discount amortization per year = 50000/5 = 10000

Period Cash payment (credit) Interest expense (debit) Discount on Bonds Payable (Credit) Discount on Bonds Payable Balance Carrying Value
At issue 50000 1200000
12/31/20 1250000*6% = 75000 85000 10000 40000 1210000
12/31/21 75000 85000 10000 30000 1220000
12/31/22 75000 85000 10000 20000 1230000
12/31/23 75000 85000 10000 10000 1240000
12/31/24 75000 85000 10000 0 1250000
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