Inc. issued of $\%,$five$-$year bonds at a price of on January$31,($Note: When the issue price of bonds is$$ provided, as in this$$ case, you do not need to calculate it$$ yourself; just use the stated$$ price.$).$ The market interest rate at the date of issuance was $\%,$ and the standard bonds pay interest$$ semi$-$annually.

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Part $1$

Requirement $1.$ Prepare an$$ effective$-$interest amortization table for the bonds through the first three interest payments. $($Round your answers to the nearest whole$$ dollar.$)$

Unger Autoparts

Amortization Table

A

B

C

D

E

Semi$-$annual Interest Date

Interest Payment $(2\mathrm{.}5\%$ of Maturity Value$)$

Interest Expense $(3\mathrm{.}5\%$ of Preceding Bond Carrying Amount$)$

Bond Discount Amortization $($B $-$ A$)$

Bond Discount Account Balance $($Preceding D $-$ C$)$

Bond Carrying Amount $($$$130,000-$ D$)$

January $31,20$X$1$

July $31,20$X$1$

$3250$

January $31,20$X$2$

$3250$

July $31,20$X$2$

$3250$

Part $2$

Requirement $2.$ Record issuance of the bonds on January$31,,$ and payment of the first$$ semi$-$annual interest amount and amortization of the bonds on July$31,.$

Start by recording the issuance of bonds on January$31,.($Record debits$$ first, then credits. Exclude explanations from journal$$ entries.$)$

Date

Account Titles

Debit

Credit

January $31,20$X$1$

Cash

Discount on Bonds Payable

Bonds Payable

$13000$

Part $3$

$$Now$,$ record the payment of the first$$ semi$-$annual interest amount and amortization of the bonds on July$31,.($Record debits$$ first, then credits. Exclude explanations from journal$$ entries.$)$

Date

Account Titles

Debit

Credit

July $31,20$X$1$

Interest Expense

Discount on Bonds Payable

Cash

Part $4$

Requirement $3.$ How much cash did borrow on January$31,?$ How much cash will pay back at maturity on January$31,?$

Amount of cash Unger Autoparts borrowed on January $31,20$X$1$:

Amount of cash Unger Autoparts will pay back on January $31,20$X$6$:

Part $5$

Requirement $4.$ How much cash interest will pay each six$$ months?

Amount of cash interest Unger Autoparts will pay each six months:

Part $6$

Requirement $5.$ How much interest expense will report on July$31,,$ and on January$31,?$ Why does the amount of interest expense increase each$$ period? Explain in detail.

In this$$ step, enter the interest expense amounts will report on July$31,,$ and on January$31,.$

Interest expense Unger Autoparts will report on July $31,20$X$1$:

Interest expense Unger Autoparts will report on January $31,20$X$2$:

Part $7$

Why does the amount of interest expense increase each$$ period?

Interest expense increases because the

bond carrying amount increases

bond carrying amount decreases

bond carrying amount increases

discount account balance decreases

discount account balance increases

as the bonds move toward$$ maturity, and the

discount

discount

premium

must be amortized over the life of the bond. The

increasing

decreasing

increasing

bond carrying amount produces

an increasing

a constant

a decreasing

an increasing

amount of interest expense each period.