2.c

2.LO 9.2: Effective-Interest Amortization On January 1, 2021, Beerbo issues $100,000 of bonds. The bonds have a stated rate (i.e. coupon rate) of 10%. The bonds mature on December 31, 2023. Complete the tasks for each scenario below. Use the present value tables below when necessary. Assume Beerbo has a December 31 fiscal year-end (FYE), uses the effective-interest method to amortize premiums and discounts, and has the following accounts in its ledger: Bonds Payable - Cash Discount on Bonds Payable - Interest Expense Premium on Bonds Payable PV $1 n = 3 4.5% 5.0% 5.5% 9.0% 10.0% 11.0% 0.8763 0.8638 0.8516 0.7721 0.7513 0.7311 0 4 1 8 1 9 0.7679 0.7462 0.7252 0.5962 0.5644 0.5346 0 2 5 7 7 4 n=6 PVOA $1 n = 3 4.5% 5.0% 5.5% 9.0% 10.0% 11.0% 2.7489 2.7232 2.6979 2.5312 2.4868 2.4437 6 5 3 9 5 1 5.1578 5.0756 4.9955 4.4859 4.3552 4.2305 7 9 3 2 6 4 n = 6 2.c.market rate> stated rate interest payments per year market rate (a.k.a. effective rate; yield) 1 (December 31) 11% 2.c.i.Bond information - The bonds are issued at [a premium /par / a discount]. - The bonds pay interest (annually / semi-annually]. - The amount of cash interest paid each period is...... $ On each interest payment date, the cash interest paid will be... [greater than / equal to / less than) interest expense recognized The total number of interest payments over the bond term is....... - Determine bond issue price using the present value factors in the tables above (round your results to the nearest dollar; see example on p.848 of your textbook for help) present value of bond face value...... present value of cash interest payments A SA $ bond issue price......... (answer only if applicable) the beginning balance of bond premium / discount amount is..... $ 2.c.ii. Complete the bond amortization table (only fill in the necessary cells; round each input to the nearest dollar: see examples on pp.511-515 of your textbook for help) Prem. / Cash Disc. Prem. / Interest Interest Amortizatio Disc. Bond Carrying Date Payment Expense Balance Value n Over time... the carrying value will [increase / maintain / decrease] interest expense will increase / maintain / decrease) (answer only if applicable) Over the life of the bond, the premium amortization amount will... [increase / maintain / decrease). Over the life of the bond, the discount amortization amount will... [increase / maintain / decrease).... . *** 2.c.iii. Provide journal entries for the following transactions (only fill in the necessary cells). Issue date DR CR 1st interest payment DR CR 2nd interest payment DR CR