Part A On January 1, 2022, East Pacific Enterprises issued 9%, 10-year bonds with a face amount of $1,350,000 for cash $1,265,880. Interest is payable semiannually on June 30 and December 31. The bonds were issued for an effective interest rate of 10%. Required: a. Prepare an amortization table for the first 3 payment periods using the effective interest method in the following format (rounded to the nearest two decimal place): (4 marks) Semi-annual (A) Interest Period-end (B) (C) (D) (E) Cash Bond Discount Interest Interest Amortization Discount Unamortized Carrying Amount Date Paid Expense b. Prepare the journal entry (without explanation) to record the issuance of the bonds on January 1, 2022. (3 marks) c. Prepare the journal entry (without explanation) to record the third interest payment on June 30, 2023. (3 marks) d. Describe four characteristics of the effective-interest method of accounting for bonds. (4 marks)
Part A On January 1, 2022, East Pacific Enterprises issued 9%, 10-year bonds with a face amount of $1,350,000 for cash $1,265,880. Interest is payable semiannually on June 30 and December 31. The bonds were issued for an effective interest rate of 10%. Required: a. Prepare an amortization table for the first 3 payment periods using the effective interest method in the following format (rounded to the nearest two decimal place): (4 marks) Semi-annual (A) Interest Period-end (B) (C) (D) (E) Cash Bond Discount Interest Interest Amortization Discount Unamortized Carrying Amount Date Paid Expense b. Prepare the journal entry (without explanation) to record the issuance of the bonds on January 1, 2022. (3 marks) c. Prepare the journal entry (without explanation) to record the third interest payment on June 30, 2023. (3 marks) d. Describe four characteristics of the effective-interest method of accounting for bonds. (4 marks)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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