Effective Interest Amortization of bond retiring bonds Ike i

Effective Interest: Amortization of bond; retiring bonds

Ike issues $170,000 of 9%, three-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. They are issued at $174,453. Their market rate is 8% at the issue date.

2. Complete the below table to calculate the total bond interest expense to be recognized over the bonds\' life.

3. Prepare an effective interest amortization table for the bonds\' first two years.

4. Prepare the journal entries to record the first two interest payments.

5. Prepare the journal entry to record the bonds\' retirement on January 1, 2019, at 98.

Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity 0 Less amount borrowed Total bond interest expense 0

Solution

Solution 2:

Solution 3:

Solution 4:

Solution 5:

Total bond interest expense over the life of bond
Particulars	Amount
Amount Repaid:
6 semiannual interest payments of $7,650 each	$45,900.00
Par Value at Maturity	$170,000.00
Total Repayments	$215,900.00
Less: Amount borrowed	$174,453.00
Total bond interest expense	$41,447.00