Problem 7 36A (Algo) Straight line amortization of a bond discount LO 7 8 During Year 1 and Year 2, Kale Co completed the following transactions relating to its bond issue The companys fiscal year ends on December 31 Year 1 Mar 1 Issued $330,000 of 8 year, 8 percent bonds for $324,000 The semiannual cash payment for interest is due on March 1 and September 1, beginning September Year 1 Sept 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest Dec 31 Recognized accrued interest expense including the amortization of the discount Year 2 Mar 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest Sept 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest Dec 31 Recognized accrued interest expense including the amortization of the discount Required When the bonds were issued, was the market rate of interest more or less than the stated rate of interest If the bonds had sold at face value, what amount of cash would Kale Co have received Prepare the liabilities section of the balance sheet at December 31, Year 1 and Year 2 Determine the amount of interest expense Kale would report on the income statements for Year 1 and Year 2 Determine the amount of interest Kale would pay to the bondholders in Year 1 and Year 2 KALE CO Balance Sheet (Partial) As of December 31 Year 1 Year 2 Liabilities Interest payableselected answer correct $8,800selected answer correct $8,800selected answer correct Bonds payableselected answer correct 330,000selected answer correct 330,000selected answer correct Less Discount on bonds payableselected answer correct 5,375selected answer correct 4,625selected answer correct Carrying value of bonds payable 324,625 325,375 Total liabilities $333,425 $334,175 Year 1 Year 2 c Interest expense $22,625selected answer correct $27,150selected answer correct d Interest paid $13,200selected answer correct $26,400selected answer correct I USED THE SOLUTION AT THE LINK BELOW TO GET MY ANSWERS BUT I DO NOT UNDERSTAND WHERE THE FRACTIONS ARE COMING FROM TO CALCULATE THE INTEREST PAYABLE ( 4 12 ), AMORTIZATION OF MAR 1 ( 2 6 ) SEP 1 ( 1 6 ) DEC 31 ( 4 6 ), AND THE FRACTIONS USED IN THE INTEREST EXPENSE AND INTEREST PAID CALCS I ALSO DONT REALLY UNDERSTAND THE 16 PART I KNOW IN 8 YEARS WE HAVE 16 6 MONTH PERIODS WOULD GREATLY APPRECIATE SOMEONE EXPLAINING IN WORDS WHERE ALL THE FRACTIONS ARE COMING FROM https www chegg com homework help questions and answers year 1 year 2 kale co completed following transactions relating bond issue company s fisca q57192858

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Problem 7-36A (Algo) Straight-line amortization of a bond discount LO 7-8 During Year 1 and Year 2, Kale Co. completed the following transactions relating to

Problem 7-36A (Algo) Straight-line amortization of a bond discount LO 7-8

During Year 1 and Year 2, Kale Co. completed the following transactions relating to its bond issue. The companys fiscal year ends on December 31.

Year 1

Mar.	1	Issued $330,000 of 8 year, 8 percent bonds for $324,000. The semiannual cash payment for interest is due on March 1 and September 1, beginning September Year 1.
Sept.	1	Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest.
Dec.	31	Recognized accrued interest expense including the amortization of the discount.

Year 2

Mar.	1	Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest.
Sept.	1	Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest.
Dec.	31	Recognized accrued interest expense including the amortization of the discount.

Required

When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? If the bonds had sold at face value, what amount of cash would Kale Co. have received?
Prepare the liabilities section of the balance sheet at December 31, Year 1 and Year 2.
Determine the amount of interest expense Kale would report on the income statements for Year 1 and Year 2.
Determine the amount of interest Kale would pay to the bondholders in Year 1 and Year 2.

KALE CO.
Balance Sheet (Partial)
As of December 31
	Year 1	Year 2
Liabilities
Interest payableselected answer correct	$8,800selected answer correct	$8,800selected answer correct
Bonds payableselected answer correct	330,000selected answer correct	330,000selected answer correct
Less: Discount on bonds payableselected answer correct	5,375selected answer correct	4,625selected answer correct
Carrying value of bonds payable	324,625	325,375
Total liabilities	$333,425	$334,175

		Year 1	Year 2
c.	Interest expense	$22,625selected answer correct	$27,150selected answer correct
d.	Interest paid	$13,200selected answer correct	$26,400selected answer correct

I USED THE SOLUTION AT THE LINK BELOW TO GET MY ANSWERS. BUT I DO NOT UNDERSTAND WHERE THE FRACTIONS ARE COMING FROM TO CALCULATE THE INTEREST PAYABLE (*4/12?), AMORTIZATION OF MAR 1 (*2/6?) SEP 1 (*1/6?) DEC 31 (*4/6?), AND THE FRACTIONS USED IN THE INTEREST EXPENSE AND INTEREST PAID CALCS.

I ALSO DONT REALLY UNDERSTAND THE /16 PART. I KNOW IN 8 YEARS WE HAVE 16 6 MONTH PERIODS.

WOULD GREATLY APPRECIATE SOMEONE EXPLAINING IN WORDS WHERE ALL THE FRACTIONS ARE COMING FROM!

https://www.chegg.com/homework-help/questions-and-answers/year-1-year-2-kale-co-completed-following-transactions-relating-bond-issue-company-s-fisca-q57192858