Question

Swoot, Inc issued serial bonds on January 1, 2020 that mature 5 years later on December 31, 2024. There are 2,500 bond issued with a face value per bond of $1,000. The stated rate is 8% and the market rate is 9%. In the box below, provide the journal entry for December 31, 2022 (round all numbers to the whole dollar using 5/4 rounding and no commas, enter debits as positive number and enter credits in brackets "O"). HTML Editor | B I J A AI = = = = = = = = 1 12pt Paragraph box More External Tools Interest Expense 216,248 Bonds Payable 500,000 Cash (700,000) Discount on Bonds Payable (16,248)

Answer 1

Face Value of Bonds PV factor (9%, 5 years) Present Value of Face Value $ 2,500,000 0.64993 $ 1,624,825 (a) $ Interest @ 8% PV of Annuity factor (9%, 5 years) Present Value of Interest 200,000 3.88965 777,930 (b) $ Issue Price of Bond (a+b) $ 2,402,755 Discount on Issue $ 97,245 SWOOT INC. Bond Amortization Table Effective Interest Method - Semi Annual Interest Payments 8% Bonds Issued at market rate of 9% Bond Interest Interest Discount Amortized Date Payment Expense Amortization Cost Jan 1,2021 $ 2,402,755 Dec 31,2021 $ 200,000 $ 216,248 $ 16,248 $ 2,419,003 Dec 31,2022 $ 200,000 $ 217,710 $ 17,710 $ 2,436,713 Dec 31,2023 $ 200,000 $ 219,304 $ 19,304 $ 2,456,017 Dec 31,2024 $ 200,000 $ 221,042 $ 21,042 $ 2,477,059 Dec 31,2025 $ 200,000 $ 222,941 $ 22,941 $ 2,500,000 Journal Enty Credit Debit 217,710 Jan 1,2020 Interest Expense Discount on Bonds payable Cash (17,710) (200,000)

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