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

question 57

Essay

A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,2010,at a selling price of $885,295,to yield the buyers a 12% return.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:
$\begin{array}{|c|c|c|c|c|c|}\hline \begin{array}{c}\text { Semiannual } \\\text { Interest }\end{array} & \begin{array}{c}\text { Cash Interest } \\\text { Period }\end{array} & \begin{array}{c}\text { Bond Interest } \\\text { Expense }\end{array} & \begin{array}{c}\text { Discount } \\\text { Amortization }\end{array} & \begin{array}{c}\text { Unamortized } \\\text { Discount }\end{array} & \begin{array}{c}\text { Carrying } \\\text { Value }\end{array} \\\hline\end{array}$

(2)Prepare the journal entry to record the first semiannual interest payment.

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Definitions:

Interchangeable Parts

Interchangeable parts are components that are made to specifications that ensure they are so nearly identical that they will fit into any assembly of the same type, reducing manufacturing complexity and allowing for easier repair of mechanical systems.

Labor Surplus

A situation in which the supply of workers exceeds the demand for their services, often leading to unemployment and lower wages.

Economic Depression

A long-term downturn in economic activity characterized by high unemployment, low consumer spending, and business failures.

Pre-Industrial Artisan

A skilled craftsperson who manually produces goods or provides services, traditionally working within a small-scale, labor-intensive process prior to industrialization.