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 $630,000 on November 1, 2021. The bonds sold for $567,653, a price to yield the market rate of 8%. The bonds mature October 31, 2041 (20 years). Interest is paid semiannually on April 30 and October 31 and is determined using the effective interest method. Required: 1. What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2021? 2. What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2021? 3. What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2022? 4. What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2022? (For all requirements, do not round your intermediate calculations. Enter your answers in whole dollars.) 1. Interest expense 2. Bonds payable Interest payable 3. Interest expense 4. Bonds payable Interest payable

Answer 1

$ 682 Answer Page No 0 Amortisation schedule of effective interest mebhod Date cash payment t effective Decrease in interest@uv. balance Balance Mulai $567,653 3014122 $22050 $22406 $656 $ 568309 31/10122 $22050 $ 22732 $568991 301423 $ 22050 $22760 #10 $569701 Cash payment = $630,000 X = 630,000 X 3.564. z $22050 Effective interest e Previous balance x 4% (181=47) Decorease in balance = ebbeefive interest - cash payment Balance = Previous balance + decrease in balance On dec 31, 2021 ... Interest expense = $22706 X = $7569 (novi to dec 31) (*2 months (semiannually a sequines 6months

Page No ③ Internet expense = $1569] Dinterese payable Interest payable = 21050 X. = $7350 1.: Interest payable = $1350 Bands payable Ronds payable t 420.000 - Cousco - 664,62) – (es = C2960-6 69348 – 2010) = 630 1623421 (2. en 3014/22 decycase in bal - 656) = 567,872 11. Bonds payable = $ 567,872 O Interest expense On dec 31, 2002 Tani to apo 30 = 22406 x Mayl to Oct 31 - 22732 x Novito dec 3) = 22466% Z = $15137 = $12732 = $ 7587 :,

Page No ③ - ,. Interest expense = 15137 + 22732 +7587 $ 45456 1. Interest expense = $45456 @ Senteret. payable Interest payable = 12050 x $1350 1. Potenest payable = $ 4350 Benda payable Bonds payable = face amount - ( discount on bonds payable -- 301y armortization -- 3150 amortization - 3113 amortization) = 630,000 - [CZoco 567653) — 656 - 682 – (710x3)) = 630,000. - (62344 - 656 - 682 - 237) = $569228 1.'. Bonds payable = $569228

Page No ③ o Inforest expense $9569 $ 567,872 Bonds payable Interest payable 1 $5350 e © interest expense Bonds payable Tinterest payable $45456 5569228 $ 4350