A Company Issued 10%,5-Year Bonds with a Par Value of $2,000,000,on

question 150

Essay

A company issued 10%,5-year bonds with a par value of $2,000,000,on January 1.Interest is to be paid semiannually each June 30 and December 31.The bonds were sold at $2,162,290 based on an annual market rate of 8%.The company uses the effective interest method of amortization.
(1)Prepare an amortization table for the first two semiannual payment periods using the format shown below.
$$\begin{array} { | l | l | l | l | l | l | } \hline \text { Semiannual } & \text { Cash } & \text { Bond } & & & \\\hline \text { Interest } & \text { Interest } & \text { Interest } & \text { Premium } & \text { Unamortized } & \text { Carrying } \\\hline \text { Period } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Premium } & \text { Value } \\\hline & & & & & \\\hline & & & & & \\\hline & & & & & \\\hline\end{array}$$
(2)Prepare the journal entry to record the first semiannual interest payment.

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Definitions:

AGI

Adjusted Gross Income; an individual's total gross income minus specific deductions, used to determine taxable income.

Dependent

An individual, typically a child or family member, whose maintenance and support can be claimed as a deduction by another, usually for tax purposes.

Head of Household

A tax filing status for individuals who are unmarried or considered unmarried, provide more than half of the household expenses, and have a qualifying person living with them.

Qualifying Child

A dependent who meets specific IRS criteria relating to relationship, age, support, and residence for tax purposes.