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b) After completing all of the entries for the Straight-Line portion in Exercise 8, what is the cash proceeds upon issuance of the bond? See
b) After completing all of the entries for the Straight-Line portion in Exercise 8, what is the cash proceeds upon issuance of the bond? See circle on the printed exercise
c) After completing all of the entries for the Effective Interest Rate portion in Exercise 8, what is the correct Premium Amortization amount for the first interest period (from table)? See circle on the printed exercise.
Exercise 8: Complete the following problem A $20,000, 2 year, 10% (Stated rate) bond is sold when the Effective (Market) rate is 8%. The bond pays interest semi-annually. Assuming a price of 104 at issuance record the following 1. Entry required upon issuance of the bond Cash proceeds: $ 2. Entry on the first interest payment date. Use STRAIGHT-LINE method for amortization a. Actual Interest payment $ b. Amortization of the Premium using the STRAIGHT-LINE method. S Entry on the second interest payment date. Use STRAIGHT-LINE method for amortization a. Actual Interest payment periods- $ 3. b. Amortization of the Premium using the STRAIGHT-LINE method Premium on Bonds Cash Payable Bonds Payable Interest Expense Next, use the t-accounts below the table to repeat the same three steps (from above) but this time use the EFFECTIVE INTEREST RATE METHOD. Round any calculations to the nearest dollar 10% x $20K | 8% x Col.E (B - A) Premium Amortization (D - C) Premium Balance 800 ($20K D) Carrying Amount 20,800 Interest Pymt Interest Paid Interest Premium on Bonds Payable Cash Bonds Payable Interest ExpenseStep by Step Solution
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