Homework Set 9. 1.LO 9.1:Straight-Line 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 straight-line 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 n=6 4.5% 5.0% 5.5% 9.0% 10.0% 11.0% 0.87630 0.86384 0.85161 0.77218 0.75131 0.73119 0.76790 0.74622 0.72525 0.59627 0.56447 0.53464 I PVOA $1 4.5% 5.0% 5.5% 9.0% 10.0% 11.0% 2.74896 2.72325 2.69793 2.53129 2.48685 2.44371 n = 3 n = 6 5.15787 5.07569 4.99553 4.48592 4.35526 4.23054 1.c.market rate > stated rate interest payments per year market rate (a.k.a. effective rate: yield) issue quote (price as a percentage of face value) 2 (June 30; December 31) 11% 98.5 - 1.c.i.Bond information The bonds are issued at [a premium /par/ a discount] - The bonds pay interest (annually / semi-annuallyl. 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 using the issue quote above (round your results to the nearest dollar bond face value $ bond issue quote (.e. price as a percentage of face value) bond issue price - (answer only if applicable) the beginning balance of bond premium / discount amount is. 1.c.li.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) Cash Interest Interest Prem. / Disc. Prem./Disc Bond Carrying Payment Expense Amortization Balance Value Date 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] 1.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
