Question

Mathieson Co. issues a $14,500,000, 8.5 % bond on 1 October 20X4. At this time, market interest rates are in the range of 8%. The bond had a 10-year life from 1 October 20X4, and paid interest semi-annually on 31 March and 30 September.

Required:
1.Calculate the proceeds that would be raised on bond issuance.

2. Prepare an amortization table using the effective interest method of amortization. Complete the first four payments only.

Period	Cash Interest Paid	Interest Expense	Discount Or Premium Amortization	Bond Carrying Value
1
2
3
....

3. Prepare journal entries for 20X4 and 20X5, using the effective interest method. Matieson has a 31 December fiscal year-end.

Answer 1

20X4--- On! n: 20 Answere- Summarized the information and data provided in the questions mathieson coi, issues a $14,500,000", 8.5°). · bond on ct-1, © Calcutting the proceeds that would be raised on bond issuance: Table values are based i = 4.25% Cash Amount | Present value flow Interest $14,500,000 %4:25% - $ 6,16,250 $616,250% PUAF 4%, 20)-$616,250x13.59033=68345 Principal $ 14,500,000 $14,500,000x PUIF(4%20) = $14,500,000 x 0.45639 $ 6,617, 655 Price of Bonds $14,992, 696 Poemium on Bords = $14,999, 696-i814,500,000 = $4,92, 696. 041

(2) Amortization table using the effective interest method of amortization Period cash payment Interest expenses Premium amortization Band carrying amnt Initial 1,49,92, 696 Period-1 6, 16, 250 5,99, 708 16,542 1,49,76, 154 Period-2 6,16,250 5,99, 046 17,204 149, 58, 950 Period-3 6, 16,250 5,98, 358. 17; 892 1,49,41, 058 Period-u 6,16,250 5,97, 642 18,608 1,49,20,450

Journal entries for 2014 & 2015 using the efective interest method; Date Accounts & explanation Debit 6 credit (5) 01-Oct-20x4 Cash 1,49,92,696 Bonds payable Premium on bords payable to bond issues at premium) 31-mar-20x5 Interest expenses $5,99,708 Premium on issue of $16,542 bond $ 6,16,250 cash Gremium on bond lamcotized for 1st period) expenses $ 5,99,046 01- Oct, 2005 Interest Premium on issue of Bond $17, gou $16,16,250 (poemium en bond amortized period) cash 100_2nd
........................................................................XXXX.............................................................................

PLEASE - - - - PLEASE KINDLY UP-VOTE. IT HELPS ME A LOT. THANK YOU IN ADVANCE.