Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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![Chapter 10 - Bond Securities
On January 1, 2021, Solo Securities issued a $600,000, 6%, three-year bonds payable. The
market rate was 4% at issuance. Interest is paid semi-annually each June 30 and December 31.
Solo Securities uses the effective interest method of amortization.
Complete the following amortization table (or as many rows as you need) to help answer the
questions that follow (round to the nearest dollar):
Carrying
Value
Period
(begin)
Market Interest
Rate Expense Interest Paid
Cash
Discount or
Premium
Carrying
Amortization Value (end)
6/30/21
12/31/21
6/30/22
12/31/22
6/30/23
12/31/23
1. What was the issuance price of the bonds on 1/1/2021. Show your work.
2. Was this bond issued at a discount, premium, or par?
3. What was the discount or premium amount on the bond when it was issued?
4. How much interest expense should be recorded for the bonds as of 6/30/21?
5. What is the carrying value of the bonds as of 12/31/21?](https://content.bartleby.com/qna-images/question/6544980f-78eb-42c1-bdf7-a346dd2568f1/84a86d9e-6d6f-47ed-90b7-d23eb610d63d/9e7m6pf_thumbnail.png)
Transcribed Image Text:Chapter 10 - Bond Securities
On January 1, 2021, Solo Securities issued a $600,000, 6%, three-year bonds payable. The
market rate was 4% at issuance. Interest is paid semi-annually each June 30 and December 31.
Solo Securities uses the effective interest method of amortization.
Complete the following amortization table (or as many rows as you need) to help answer the
questions that follow (round to the nearest dollar):
Carrying
Value
Period
(begin)
Market Interest
Rate Expense Interest Paid
Cash
Discount or
Premium
Carrying
Amortization Value (end)
6/30/21
12/31/21
6/30/22
12/31/22
6/30/23
12/31/23
1. What was the issuance price of the bonds on 1/1/2021. Show your work.
2. Was this bond issued at a discount, premium, or par?
3. What was the discount or premium amount on the bond when it was issued?
4. How much interest expense should be recorded for the bonds as of 6/30/21?
5. What is the carrying value of the bonds as of 12/31/21?
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