Problem 14-8 Bonds; effective interest; partial periodinterest; financial statem
ID: 2502181 • Letter: P
Question
Problem 14-8 Bonds; effective interest; partial periodinterest; financial statement effects LO2
The fiscal year ends December 31for Lake Hamilton Development. To provide funding for its MoonlightBay project, LHD issued 9% bonds with a face amount of $400,000 onNovember 1, 2009. The bonds sold for $375,080, a price to yield themarket rate of 10%. The bonds mature October 31, 2018 (10 years).Interest is paid semiannually on April 30 and October 31.
Problem 14-8 Bonds; effective interest; partial periodinterest; financial statement effects LO2
The fiscal year ends December 31for Lake Hamilton Development. To provide funding for its MoonlightBay project, LHD issued 9% bonds with a face amount of $400,000 onNovember 1, 2009. The bonds sold for $375,080, a price to yield themarket rate of 10%. The bonds mature October 31, 2018 (10 years).Interest is paid semiannually on April 30 and October 31.
1) What amount related to the bonds will LHD report in its balancesheet at December 31, 2009 for bonds payable?2) What amount of interest expense related to the bonds will LHDreport in its income statement for the year ending December 31,2010?
Explanation / Answer
BondsPayable 400,000.00 Interest ( 18000 *2 / 6 ) 6,000.00 Discount amortized( 1286 * 2 / 6 ) 415.00 Interest expense 6,415.00