Premiere Autoparts nc. issued $130 000 o 3%, 10-year bonds at a p ce o 85 on Jan
ID: 2574769 • Letter: P
Question
Premiere Autoparts nc. issued $130 000 o 3%, 10-year bonds at a p ce o 85 on January 31 2017. The market interest ate at he date issuance was 6%. and he standard bond pa interest se mi annually. 1. Prepare an effective-interest amortization table for the bonds through the first three interest payments. 2. Record Premiere's issuance of the bonds on January 31,2017, and payment of the first semi-annual interest amount and amortization of the bonds on July 31. 2017. Explanations are not required. 1. Prepare an effective-interest amortization table for the bonds through the first three interest payments. (Round your answers to the nearest whole dollar.) Premiere Autoparts Amortization Table Interest Payment (1.5% of Intorest Expense (3% of Precoding Bond Bond Bond Discount Amortization (B - Bond Discount Semi-annual Account Balance CarryingAmount A) Preceding D -C) ($130,000 D) Jan 31, 2017 July 31, 2017 Jan 31, 2018 July 31, 2018Explanation / Answer
Allocate the cost of the service departments to the operating departments using the reciprocal method
Bond amortization Table using effective interest method
date
Interest payment = 1.5% of face value
Interest expense = carrying value*3%
discount amortized
bond discount account balance
Bond carrying amount
Jan 31 2017
19500
110500
July 31 2017
1950
3315
1365
18135
111865
Jan 31 2018
1950
3355.95
1405.95
16729.05
113271
July 31 2018
1950
3398.129
1448.129
15280.92
114719.1
Date
Explanation
debit
credit
31-Jan
cash
110500
discount on bond payable
19500
bonds payable
130000
31-Jul
interest expense
3315
cash
1950
discount on bonds payable
1365
False, it increases towards maturity value
Allocate the cost of the service departments to the operating departments using the reciprocal method
Bond amortization Table using effective interest method
date
Interest payment = 1.5% of face value
Interest expense = carrying value*3%
discount amortized
bond discount account balance
Bond carrying amount
Jan 31 2017
19500
110500
July 31 2017
1950
3315
1365
18135
111865
Jan 31 2018
1950
3355.95
1405.95
16729.05
113271
July 31 2018
1950
3398.129
1448.129
15280.92
114719.1
Date
Explanation
debit
credit
31-Jan
cash
110500
discount on bond payable
19500
bonds payable
130000
31-Jul
interest expense
3315
cash
1950
discount on bonds payable
1365
False, it increases towards maturity value