USING A DISCOUNT AMORTIZATION TABLE (STRAIGHT LINE)

Panamint Candy Company prepared the following amortization table for $500,000 of five-year, 9.2 percent bonds issued and sold by Panamint on December 31, 2009, for

$472,000:

Period Cash Payment

(Credit)

Interest Expense

(Debit)

Discount on Bonds Payable

(Credit)

Discount on Bonds Payable Balance Carrying Value

$28,000 $472,000 6/30/10 $23,000 $25,800 $2,800 25,200 474,800 12/31/10 23,000 25,800 2,800 22,400 477,600 6/30/11 23,000 25,800 2,800 19,600 480,400 12/31/11 23,000 25,800 2,800 16,800 483,200 6/30/12 23,000 25,800 2,800 14,000 486,000 12/31/12 23,000 25,800 2,800 11,200 488,800 6/30/13 23,000 25,800 2,800 8,400 491,600 12/31/13 23,000 25,800 2,800 5,600 494,400 6/30/14 23,000 25,800 2,800 2,800 497,200 12/31/14 23,000 25,800 2,800 0 500,000 Required:

. Prepare the entry to recognize the sale of the bonds on December 31, 2009.

. Prepare the entry to recognize the first interest payment on June 30, 2010.

. Determine the interest expense for these bonds that Panamint will report on its 2012 income statement.

. Indicate how these bonds will appear in Panamint’s December 31, 2013, balance sheet.

Exercise