Bonds Payable: On January 1, 2016 – Baker Corporation issued $800,000 of 20-year
ID: 2342672 • Letter: B
Question
Bonds Payable: On January 1, 2016 – Baker Corporation issued $800,000 of 20-year, 11% bonds for $739,815, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30th and December 31.
A. Confirm the bond issue price. B. Indicate the financial statement effects using the template for (1) bond issuance, (2) semiannual interest payable and discount amortization on June 30, 2014, and (3) semiannual interest payment and discount amortization on December 31, 2016.
Explanation / Answer
a) Bond issue price
bond issue price 739815/8000 bonds
bond issue price = 92.48 per bond
(b)
discount amortise on june =389
discount amortise on december 31 =412
Date interest payment(5.5%) interest exp 6% amortization of bond discount book value jan 16 60185 739815 30 june 16 (800000*5.5%)=44000 (739815*6%)=44389 (44389-44000)=389 (739815+389)=740204 31 dec 16 (800000*5.5%)=44000 (740204*6%)=44412 (44412-44000)=412 (740204+412)=740616