The fiscal year ends December 31 for Lake Hamilton Development. To provide fundi

Question

The fiscal year ends December 31 for Lake Hamilton Development. To provide funding for its Moonlight Bay project, LHD issued 7% bonds with a face amount of $510,000 on November 1, 2018. The bonds sold for $459,529, a price to yield the market rate of 8%. The bonds mature October 31, 2038 (20 years). Interest is paid semiannually on April 30 and October 31 and is determined using the effective interest method.

Required: (Having trouble figuring out calculations) :/
1. What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2018?
2. What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2018?
3. What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2019?
4. What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2019?

1. Interest Expense (4% * 459529 *2/6?) ? 2. Bonds Payable (less discount ?) Interest Payable 3. Interest Expense 4. Bonds Payable Interest Payable

Explanation / Answer

17850

(510000*7%/2)

18381

(459529*8%/2)

18402

(460060*8%/2)

18424

(460612*8%/2)

Part 1

amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2018 = 18381*2/6=6127

Part 2

amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2018

Interest payable = 17850*2/6= 5950

Bonds payable = 510000

Discount payable

(510000-459529)=50471

Less amortization (531*2/6)=(177)

Discount payable =50471-177= 50294

Bonds payable =510000-50294=459706

Part 3

1/1 - 4/30=18381*4/6= 12254

5/1 - 10/31 =18402*6/6= 18402

11/1 - 12/31 =18424*2/6 = 6141

Total =36797

Part 4

Interest payable =17850*2/6=5950

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