Homework Chapter 9 HW HW Score 72 78 28 ce 10 pts Solution 1

Homework: Chapter 9- HW HW Score: 72 78%, 28 ce 10 pts

Solution

1. When interest is payable semi-annually, interest rates got reduced to half and period gets double. Bond price = 2000000 * 2.5% * PVIFA(3.5% , 20) + 2000000 * PVIF( 3.5% , 20) = 50000 *14.2124 + 2000000 * 0.5026 = 1715820 2. Amortisation schedule for 1st year: Period cash interest Interest exp discount amortised carrying value Dec 31 16 1715820 June 30 17 50000 60053.7 10053.7 1725873.7 Dec 31 17 50000 60405.58 10405.58 1736279.28 3. Journal entries: Dec 31 16 Cash 1715820 Discount on bond issue 284180 Bond payable 2000000 (being issue of bond at discount) June 30 17 Interest Expnese 60053.7 Cash 50000 Discount on Bond issue 10053.7 (being payment of first interest with amortisation of discount) Dec 31 17 Interest Expnese 60405.58 Cash 50000 Discount on Bond issue 10405.58 (being payment of second interest with amortisation of discount)