above Exercise 4 On January 1 2016 Jax Co issued a 4 10year

above Exercise 4 On January 1, 2016, Jax Co. issued a 4%, 10-year bonds payable at 96. At December 31, 2017, lax reported the following values for its bond: Bonds payable: Discount: $550,000 $17,600 al interests each June The company uses the straight-line amortization method and pays semiannu 30 and December 31 Answer the following questions about Jax\'s bonds payable: a) What is the maturity value of the What is the carrying amount of the bonds at December 31, 2017? c) What is the annual bonds? b) ash interest payment on the bonds? d) How much interest expense should the company record each year? Record the issuance of the bond and the June 30, 2018, semiannual interest payment and amortization of discount. What will the carrying amount of the bonds be at December 31,2018? ercise 5 ncor in 2017

Solution

As per policy, only four parts of a question is allowed to answer, so answering a - d :

a)The maturity value of the bond is the par value of the bond ie. $ 550,000.

b)The carrying amount of the bonds at December 31, 2017 is Bonds Payable account balance minus Discount account balance ie. $550000 - $17600 = $532400

c)The annual cash interest payment on the bonds are = $550000 * 4% = $22000

d)The interest expense recorded by the company each year is = Cash interest + Annual amortization of discount = $22000 + $17600/8 = $22000 + $2200 = $24200 .