On January 1, Year 1, Kennard Co. issued $2.000,000, 5%, 10-year bonds, with int
ID: 2390775 • Letter: O
Question
On January 1, Year 1, Kennard Co. issued $2.000,000, 5%, 10-year bonds, with interest payable on June 30 and December 31 to yield 6%. The bonds were issued for $1,851,234. Required Prepare an amortization schedule for Year 1 and Year 2 rate method. Round figures to nearest dollar. Show how this bond would be reported on the balance sheet at December 31, Year 2. Refer to the lists of Amount Descriptions for the exact wording of the answer choices for text entries. If an amount is a negative number use a minus sign to indicate. using the effective interest (b) Amount Descriptions Bond payable Unamortized bond discountExplanation / Answer
a) Aomrtizaion Table : Date Interest Paid Interest Expense Amortization Bonds Carrying Value 1/1. Year 1 $ 18,51,234 6/30 /Year 1 50,000 55,537 5,537 18,56,771 12/31/ Year 1 50,000 55,703 5,703 18,62,474 6/30/ Year 2 50,000 55,874 5,874 18,68,348 12/31/ Year 2 50,000 56,050 6,050 18,74,399 Working: a. Interest Expense = Beginning Book Value x Semi annual yield Date Beginning Book Value Semi annual Yield Interest Expesnse 6/30 /Year 1 $ 18,51,234 3% $ 55,537 12/31/ Year 1 $ 18,56,771 3% $ 55,703 6/30/ Year 2 $ 18,62,474 3% $ 55,874 12/31/ Year 2 $ 18,68,348 3% $ 56,050 b. Interest paid = Par Value of bond x Semi annual coupon rate = $ 20,00,000 x 2.5% = $ 50,000 b) Partial Balance sheet 1) Liabilities 2) Bonds Payable $ 20,00,000 3) Unamortized bond discount $ 1,25,601 $ 18,74,399 Working: Bonds Payable $ 20,00,000 Bonds Carrying Value 18,74,399 Unmortize discount $ 1,25,601