Question

Riverbed Company sells 10% bonds having a maturity value of $2,550,000 for $2,366,166. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.

Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to 0 decimal places, e.g. 38,548.)

Schedule of Discount Amortization Straight-Line Method
Year		Cash Paid		Interest Expense		Discount Amortized		Carrying Amount of Bonds
Jan. 1, 2017		$		$		$		$
Jan. 1, 2018
Jan. 1, 2019
Jan. 1, 2020
Jan. 1, 2021
Jan. 1, 2022

Answer 1

Solution

Year	Cash Paid	Interest expense	Discount Amortized	Carrying Amount of Bonds
Jan. 1, 2017				$ 2,366,166
Jan. 1, 2018	$   255,000	$ 291,767	$ 36,767	$ 2,402,933
Jan. 1, 2019	$   255,000	$ 291,767	$ 36,767	$ 2,439,700
Jan. 1, 2020	$   255,000	$ 291,767	$ 36,767	$ 2,476,466
Jan. 1, 2021	$   255,000	$ 291,767	$ 36,767	$ 2,513,233
Jan. 1, 2022	$   255,000	$ 291,767	$ 36,767	$ 2,550,000

Working

Bond issue price (390000/100*102)	$ 2,366,166
Face value	$ 2,550,000
Discount on bonds payable	$ 183,834
Number of Interest payments	5
Discount/ premium to be amortized per year	$ 36,767
Cash Interest on bond (2550000 x 10)	$ 255,000
Interest expense to be recorded (36767+255000)	$ 291,767