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BU Curriculum Corporation issued $900,000 of 8% on November 1, 2018, due on November 1, 2023....

BU Curriculum Corporation issued $900,000 of 8% on November 1, 2018, due on November 1, 2023. The interest is to be paid twice a year on Nov. 1 and May 1. The bonds were sold to yield 10% effective annual interest. BU Curriculum Corporation closes its books annually on December 31.

Date    Credit Cash Debit Interest Expense Credit Bond Discount Carrying Amount of Bonds
Nov. 1, 2018
May. 1, 2019 (continue schedule using excel)

Complete an amortization schedule for the above bond (for all periods) using the STRAIGHT-LINE AMORTIZATION METHOD. Round to nearest dollar

PV=$830504 Payment =36000

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Answer #1

Answer

  • All working forms part of the answer
  • Working

A

Face Value of Bonds Payable

$              900,000

B

PV [or Issue price]

$              830,504

C = A - B

Discount on Bonds Payable

$                69,496

D

Term of Bonds [years]

5

E = D x 2

No. of interest payments

10

F = C/E

Straight Line amortisation with each payment

$                  6,950

  • Answer

Date   

Credit Cash

Debit Interest Expense

Credit Bond Discount

Carrying Amount of Bonds

01-Nov-18

$        830,504

01-May-19

$                            36,000

$           42,950

$                 6,950

$            837,454

01-Nov-19

$                            36,000

$           42,950

$                 6,950

$            844,403

01-May-20

$                            36,000

$           42,950

$                 6,950

$            851,353

01-Nov-20

$                            36,000

$           42,950

$                 6,950

$            858,302

01-May-21

$                            36,000

$           42,950

$                 6,950

$            865,252

01-Nov-21

$                            36,000

$           42,950

$                 6,950

$            872,202

01-May-22

$                            36,000

$           42,950

$                 6,950

$            879,151

01-Nov-22

$                            36,000

$           42,950

$                 6,950

$            886,101

01-May-23

$                            36,000

$           42,950

$                 6,950

$            893,050

01-Nov-23

$                            36,000

$           42,950 or $ 42,946 for adjustments

$                 6,950 or $ 6,946 for adjustments

$            900,000

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