The company Unlimited Gain issues $2,000,000 face value of seven-year bonds on January 1, 2022 when the market interest
Posted: Sun Apr 10, 2022 8:30 am
The company Unlimited Gain issues $2,000,000 face value of
seven-year bonds on January 1, 2022 when the market interest rate
is 5%. The bonds are sold for $1,884,272 and the bonds pay 4%
interest annually. (Round to the nearest dollar)
Required:
i. Prepare the issuer's journal entry to record the issuance of
the bond. (3 marks)
ii. Compute the total bond interest expense over the bonds’
life. (1 mark)
iii. Prepare an effective interest amortization table for the
first two interest payment periods using the format shown below:
(5
marks)
Annual
Interest
Period
Cash
Interest
Paid
Bond
Interest
Expense
Discount
Amortization
Unamortized
Discount
Carrying Amount
iv. Prepare the journal entry to record the first interest
payment. (3 marks)
seven-year bonds on January 1, 2022 when the market interest rate
is 5%. The bonds are sold for $1,884,272 and the bonds pay 4%
interest annually. (Round to the nearest dollar)
Required:
i. Prepare the issuer's journal entry to record the issuance of
the bond. (3 marks)
ii. Compute the total bond interest expense over the bonds’
life. (1 mark)
iii. Prepare an effective interest amortization table for the
first two interest payment periods using the format shown below:
(5
marks)
Annual
Interest
Period
Cash
Interest
Paid
Bond
Interest
Expense
Discount
Amortization
Unamortized
Discount
Carrying Amount
iv. Prepare the journal entry to record the first interest
payment. (3 marks)