The notes to the Giving Charities€™ financial statements reported the following data on December 31, Year 1 (end of the fiscal year):

Giving Charities€™ amortizes bonds by the effective-interest method and pays all interest amounts at December 31.

Requirements
1. Answer the following questions about Giving Charities€™ long-term liabilities:
a. What is the maturity value of the 6% bonds?
b. What is Giving Charities€™ annual cash interest payment on the 6% bonds?
c. What is the carrying amount of the 6% bonds at December 31, year 1?
2. Prepare an amortization table through December 31, Year 4, for the 6% bonds. The market interest rate is 8%. (Round all amounts to the nearest dollar.) How much is Giving Charities€™ interest expense on the 6% bonds for the year ended December 31, Year 4?
3. Show how Giving Charities would report the 6% bonds payable and the 5% notes payable at December 31, Year4.

Transcribed Image Text:

Note 6. Indebtedness Bonds payable, 6% due in Year .. 8$5,000,000 (520,640) $4,479,360 Notes payable, 5%, payable in amounts of $55,000 annual installments starting in Year 330,000