Question

On January 1, 2018, White Water issues $590,000 of 8% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 7% and the bonds issued at $652,997. value: 1. Required information 25.00 points Required: 1. Using an amortization schedule, show that the bonds have a carrying value of $648,117 on December 31, 2020. Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 01/01/18 6/30/18 12/31/18 6/30/19 12/31/19 6/30/20 12/31/20 648,117
Please answer parts one and two. With an explanation as to how you reached that answer. Thank you

Answer 1

Amortization table
	Col I	Col II	Col III	Col IV
Date	Interest Payment($590,000*8%*6/12)	Interest expenses(Bond carrying amount*7%*6/12)	Premium amorrtization(Col I-ColI)	Bond carrying amount
01-Jan-18				6,52,997
30-Jun-18	23,600	22,855	745	6,52,252
31-Dec-18	23,600	22,829	771	6,51,481
30-Jun-19	23,600	22,802	798	6,50,683
31-Dec-19	23,600	22,774	826	6,49,856
30-Jun-20	23,600	22,745	855	6,49,001
31-Dec-20	23,600	22,716	884	6,48,117
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	31-Dec-20	Bonds Payable	5,90,000
		Premium on Bonds	58,117
		Cash		5,39,122
		Gain on retirement of Bonds		1,08,995
	Explanation:The Bonds was issued at premium and $4,880(Total of Col III) premium has been amortized.So the balance in Premium on Bonds payable account is
	$58,117($62,997 - $4,880),Hence $58,117 has been debited and upon retirement $539,112 has been paid in cash and the Gain on retirement of Bonds is balancing figure