2. Analyzing and Reporting Financial Statement Effects of Discount Bond Transactions

Assume that on January 1, Xfinity issues $500,000 of 5-year, 8% coupon bonds payable, yielding an effective annual interest rate of 10%. Interest is payable semiannually on June 30 and December 31.

1. Compute the issue price, bond discount, and the periodic coupon interest.

Semiannual Coupon = $20,000 Issue Price = $461,391 Bond Discount = $38,609

2. Prepare an amortization table for the bonds for the five years.

Amortization table for the discount bonds for the five years

	Interest	Coupon	Premium	Premium	Bond
	Expense	Interest	Amortization	Balance	Payable, Net
0				$38,609	$461,391
1
2
3
4
5
6
7
8
9
10
Total

3. Using +/-, complete Xfinitys financial statement effects template

a. on bond issuance.

LTD

Cash

Bonds payable, face	.
Add bond premium	.
Bonds payable, net	.

b. on Jun. 30 of the 1st year.

Interest expense in I/S			Retained earnings in B/S Cash
Bond Payable in B/S			Cash in B/S

c. semiannual interest payment and premium amortization on Dec. 31 of the 1st year.

Interest expense in I/S			Retained earnings in B/S Cash
Bond Payable in B/S			Cash in B/S