Question

X Your answer is incorrect. Presented below are two independent situations. (a) Sunland Co. sold $1,970,000 of 12%, 10-year bonds at 103 on January 1, 2020. The bonds were dated January 1, 2020, and pay interest on July 1 and January 1. If Sunland uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2020, and December 31, 2020. (Round answer to O decimal places, e.g. 38,548.) Interest expense to be recorded $ 121746 (b) Coronado Inc. issued $610,000 of 9%, 10-year bonds on June 30, 2020, for $505,047. This price provided a yield of 12% on the bonds. Interest is payable semiannually on December 31 and June 30. If Coronado uses the effective-interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2020. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to O decimal places, e.g. 38,548.) Interest expense to be recorded $ 18300

Answer 1

1) Premium on Bonds Payable = 1970,000*0.03 = 59,100

Semi-Annual Bond Premium Amortized = 59,100 /(10*2) = 2,955

Semi- annual Interest = 1970,000*12%*6/12 = 118,200

Interest Expenses = 118,200-2955 = $115,245 (Answer)

2) Interest Expenses Recorded on Oct 31, 2020

For 4 Monhts ( July to Oct)

Interest expenses = 505,047*12%*4/12 = $20,201.88 = $20,202 (Answer)