A Company Issued 10%,10-Year Bonds with a Par Value of $1,000,000

question 163

Essay

A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,at a selling price of $885,295 when the annual market interest rate was 12%.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31.
(1)Prepare an amortization table for the first two payment periods using the format shown below:
$$\begin{array} { | l | l | l | l | l | l | } \hline \text { Semiannual } & \text { Cash } & \text { Bond } & & & \\\hline \text { Interest } & \text { Interest } & \text { Interest } & \text { Discount } & \text { Unamortized } & \text { Carrying } \\\hline \text { Period } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Discount } & \text { Value } \\\hline & & & & & \\\hline & & & & & \\\hline & & & & & \\\hline\end{array}$$
(2)Prepare the journal entry to record the first semiannual interest payment.

---

Definitions:

Debit Column

The left-hand side of a ledger account, recording increases in assets and expenses, and decreases in liabilities, equity, and revenue.

Expense Recognition Principle

An accounting principle that dictates expenses should be recognized in the period in which they are incurred to earn revenues.

Efforts

The use of physical or mental energy to achieve tasks and goals.

Accomplishments

Achievements or completed goals that an individual or organization has successfully attained.