Question

# help me with the ones i got wrong please Amortize Discount by interest Method On the...

help me with the ones i got wrong please
Amortize Discount by interest Method On the first day of its fiscal year, Ebert Company issued \$50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Ebert receiving cash of \$43,495,895. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Cash 43.495,895 Discount on Bonds Payable 6,504,105 Bonds Payable 50,000,000 Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense 1.957.315 Discount on Bonds Payable 207.315 Cash 1.750 Check My Work 5 more Check My Work uses remaining. Next >
As the discount or premium is amortized, the carrying amount of the bond changes. As a result, interes period. b. Compute the amount of the bond interest expense for the first year. Round to the nearest dollar. Annual interest paid 3,500,000 Discount amortized 423,960 Interest expense for first year 3,923,960 x Feedback Check My Work To find the interest expense either add any discount amortized or subtract any premium amortized to cas c. Explain why the company was able to issue the bonds for only \$43,495,895 rather than for the face amount The bonds sell for less than their face amount because the market rate of interest is greater than the cont Investors are not willing to pay the full face amount for bonds that pay a lower contract rate of interest the on similar bonds (market rate). Check My Work 5 more Check My Work uses remaining.

 Solution B: Bond interest expense for the first year = Interest paid + Discount amortized Annual Interest Paid \$          3,500,000.00 Add: Discount Amortized \$             423,959.00 =207315+216644 Interest Expense for the year \$         3,923,959.00

There was difference in answer due to rounding off.

Working:

 Year Beginning Balance Interest Expense Interest Payment Discount Amortized Unamortized Discount Ending Balance 1 Jan \$           (6,504,105) \$43,495,895 30 June \$         43,495,895 \$     1,957,315.00 \$          1,750,000 \$             (207,315) \$           (6,296,790) \$43,703,210 31 Dec \$         43,703,210 \$     1,966,644.00 \$          1,750,000 \$             (216,644) \$           (6,080,146) \$43,919,854 Total \$          3,923,959 \$          3,500,000 \$             (423,959)

Since only (b) part of the question is asked to be answered , the same have been done.

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