On January 1, 2017, Carter Sales issued $36,000 in bonds for $18,700. These are
ID: 2500807 • Letter: O
Question
On January 1, 2017, Carter Sales issued $36,000 in bonds for $18,700. These are six-year bonds with a stated interest rate of 12%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the Bond Discount. Determine the following. The semi-annual cash interest payment Amortized Bond Discount What amount is debited to Interest Expense on June 30,2017 (first semi-annual)? Prepare the journal entry to record the June 30th interest payment. Show all your work Rodriguez Tint, Inc. uses the indirect method to prepare the statement of cash flows.Explanation / Answer
1)
a) Semi-annually cash payment = $36000 * 12% * 6 months/ 12 Months
= $2160
Note:- Interest is on par value
b) Amortized Bond Disocount :
Discount issued in bond = Face value - Bond Issued
= $36000 - $18700
= $17300
"Amount of Bond Amortization" in each time interest is paid = $17300 / Number of payment
= $17300 /12
= $1441.67
Note:- Number of payment in 6 years of Bond = Semi-annually interest payment * Bond life
= 2 * 6
= 12
c) Amount to be Debited to Interest Expenses on June30, 2017 :
= cash payment + Amortization Bond discount
= $2160 + 1441.67
= $3601.67
d) Jounral Entry:
(i) Interest Expenses Dr.$3601.67
To cash $2160
To Discount in Bond Payable $1441.67
(Beind Interest Paid on 30st june,2017)