Homework SourseOn July 1 2016 Fisher Company issued 9 bonds in the face amo
On July 1, 2016, Fisher Company issued 9% bonds in the face amount of $5,000,000, which mature on July 1, 2022. The bonds were issued for $4,782,217 to yield 10%. Fisher uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2019, the unamortized bond discount should be
Solution
At June 30, 2019, the unamortized bond discount should be
$ 124,369
Working:
| Step-1:Calculation of discount on bonds payable | |||||||||||||
| Par Value | $ 50,00,000 | ||||||||||||
| Less Issue price | $ 47,82,217 | ||||||||||||
| Discount on bonds payable | $ 2,17,783 | ||||||||||||
| Step-2:Preparation of discount amortization | |||||||||||||
| Year Ended on | Cash interest paid | Interest Expenses | Discount Amortization | Unamortized discount | Bonds Carrying Value | ||||||||
| July 1, 2016 | $ 2,17,783 | $ 47,82,217 | |||||||||||
| June 30, 2017 | $ 4,50,000 | $ 4,78,222 | $ 28,222 | $ 1,89,561 | $ 48,10,439 | ||||||||
| June 30, 2018 | $ 4,50,000 | $ 4,81,044 | $ 31,044 | $ 1,58,517 | $ 48,41,483 | ||||||||
| June 30, 2019 | $ 4,50,000 | $ 4,84,148 | $ 34,148 | $ 1,24,369 | $ 48,75,631 | ||||||||
| June 30, 2020 | $ 4,50,000 | $ 4,87,563 | $ 37,563 | $ 86,806 | $ 49,13,194 | ||||||||
| June 30, 2021 | $ 4,50,000 | $ 4,91,319 | $ 41,319 | $ 45,487 | $ 49,54,513 | ||||||||
| June 30, 2022 | $ 4,50,000 | $ 4,95,451 | $ 45,451 | 0 | $ 50,00,000 | ||||||||
| Working: | |||||||||||||
| Coupon Interest paid in cash | = | Par Value x Coupon rate | |||||||||||
| = | $ 50,00,000 | x 9% | |||||||||||
| = | $ 4,50,000 | ||||||||||||
