On January 1, 2016, Parker Company issued bonds with a face value of $72,000, a
ID: 2595408 • Letter: O
Question
On January 1, 2016, Parker Company issued bonds with a face value of $72,000, a stated rate of interest of 12 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 14 percent at the time the bonds were issued. The bonds sold for $67,056. Parker used the effective interest rate method to amortize the bond discount. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
Prepare an amortization table.
What is the carrying value that would appear on the 2019 balance sheet?
What is the interest expense that would appear on the 2019 income statement?
What is the amount of cash outflow for interest that would appear in the operating activities section of the 2019 statement of cash flows?
On January 1, 2016, Parker Company issued bonds with a face value of $72,000, a stated rate of interest of 12 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 14 percent at the time the bonds were issued. The bonds sold for $67,056. Parker used the effective interest rate method to amortize the bond discount. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
Explanation / Answer
a) Amortization table year cash interest discount carrying paid expense amortized value 12% 14% 1/1/2016 67,056 12/31/2017 8,640 9388 748 67804 12/31/2018 8,640 9493 853 68656 12/31/2019 8,640 9612 972 69628 12/31/2020 8,640 9748 1108 70736 12/31/2021 8,640 9904 1264 72000 interest paid = 72000*12% 8640 interest expense = CV*14% b) carrying value (2019)= $69,628 c) interest expense = 9612 d) cash flow for interest= $8,640