Calculations Marketing Inc. issued 10.5% bonds with a par value of $440,000 and a five-year life on January 1, 2020, for $448,494. The bonds pay interest on June 30 and December 31. The market interest rate was 10% on the original issue date.
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Calculations Marketing Inc. issued 10.5% bonds with a par value of $440,000 and a five-year life on January 1, 2020, for $448,494. The bonds pay interest on June 30 and December 31. The market interest rate was 10% on the original issue date. Use TABLE 14A.1 and TABLE 14A.2. (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the total bond interest expense over the life of the bonds. Answer is complete and correct. Total interest expense $ 222,506 2. Prepare an amortization table using the effective interest method. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.) Answer is complete and correct. Cash Interest Paid IS 0 Period Interest Expense $ 0 Carrying Value Premium Unamortized Amort. premium 0$ 8,494 675 7,819 448,494 447,819 23,100 22,425 23,100 22,391 709 7,110 447, 110 23,100 22,356 745 6,365 446,365 23,100 22,318 782 5,583 Period Ending Jan. 1/20 June 30/20 Dec. 31/20 June 30/21 Dec. 31/21 June 30/22 Dec. 31/22 June 30/23 Dec. 31/23 June 30/24 Dec. 31/24 Totals 445,583 444,762 23,100 22,279 821 4,762 23,100 22,238 862 3,900 443,900 23,100 22,195 905 2,995 442,995 23,100 22,150 950 2,045 442,045 23,100 22,102 998 1,047 441,047 23,100 22,052 1,048 (1) 439,999 $ 231,000 $ 222,506 IS 8,495 3. Show the journal entries that Calculations Marketing Inc. would make to record the first two interest payments assuming a December 31 year-end. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.) No Date Debit Credit 1 June 30, 2020 Answer is complete and correct. General Journal Bond interest expense Premium on bonds payable Cash 22,425 675 23,100 2 22,391 December 31, 202 Bond interest expense Premium on bonds payable 709 Cash 23,100 4. Use the original market interest rate to calculate the present value of the remaining cash flows for these bonds as of December 31, 2022. Compare your answer with the amount shown on the amortization table as the balance for that date. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.) Answer is not complete. Present value of the remaining cash flows
