Check my work 3 The Gorman Group issued $820,000 of 13% bonds on June 30, 2018,
ID: 2530216 • Letter: C
Question
Check my work 3 The Gorman Group issued $820,000 of 13% bonds on June 30, 2018, for $881,688. The bonds were dated on June 30 and mature on June 30, 2038 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually on December 31 and June 30. 2 points Required: Complete the below table to record the company's journal entry 1. to 3. Prepare the journal entry to record their issuance by The Gorman Group on June 30, 2018, interest on December 31, 2018 and interest on June 30, 2019 (at the effective rate). Skipped eBook Complete this question by entering your answers in the tabs below Hint Print Calculation Req 1 to3 References Complete the below table to record the company's journal entry. (Round intermediate calculations and final answers to the nearest whole dollar. Enter interest rate to 1 decimal place. (i.e. 0.123 should be entered as 12.3).) December 31, 2018 Interest Rate Total Interest expense Cash Amortization of premium on bondsExplanation / Answer
Issue price of the bond= $8,81,688.00 Par Value of the bonds = $8,20,000.00 Discount to be amortized = $61,688.00 Coupon amount @ 13% = $1,06,600.00 Half yearly coupon Amount = $53,300.00 Answer =1) Working Notes: for calculation of the interest expenses Interest Expenses of Dec 31 2018 = $ 881,688 X 6% = $52,901 Less: Cash Paid $ 820,000 X 6.5% $53,300 Total interest = -$399 Interest Expenses of June 30 2019 = $ 881,289 X 6% = $52,877 Less: Cash Paid $ 820,000 X 6.5% $53,300 Amortization premium on bonds -$423 Journal Entries Date Account Title and explanation Debit Credit June, 30 2018 Cash $ 8,81,688 To 10% Bonds $ 8,20,000 To premium on bonds payable $ 61,688 Journal Entries Date Account Title and explanation Debit Credit Dec, 31 2018 Interest Expenses $ 52,901 Amortization of Premium $ 399 To Cash $ 53,300 (To Record the interest payment of Dec 31) Journal Entries Date Account Title and explanation Debit Credit June 30, 2018 Interest Expenses $ 52,877 Amortization of Premium $ 423 To Cash $ 53,300 (To Record the interest payment of june 30) Working notes EFFECTIVE - INTEREST AMORTIZATION SCHEDULE MARKET RATE OF INTEREST = 12% MARKET RATE OF INTEREST half yearly = 6% Bonds Coupon Rate = 13% Coupon amount half yearly = $53,300.00 Date Interest payment on face value Interest Expenses (Cash paid - Decrease in Carrying value) Amortization expenses Debit Balance in bond discount Credit Balance in acct payable book Value of the bond 06/30/18 $ - $ - $ - $61,688.00 $ 8,20,000.00 $ 8,81,688.00 1 12/31/18 $53,300.00 $ 52,901.28 $ 398.72 $ 61,289.28 $ 8,20,000.00 $ 8,81,289.28 2 06/30/19 $53,300.00 $ 52,877.36 $ 422.64 $ 61,711.92 $ 8,20,000.00 $ 8,80,866.64