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6. Bond Amortization

in Chapter 10 (Problem 6 of 7)

A Corporation issued $450,000 face value, 4% 10-year bonds on January 1, Year 1 for $383,063. This price resulted in an effective interest rate of 6% on the bonds. Interest is payable semi-annually on June 30 and December 31.

  1. Prepare the journal entry to record the first payment of interest on June 30, Year 1.
  2. Determine carrying value on December 31, Year 1, after the interest payments has been made
Watch Solution (7:58) Hide Solution Reveal Solution
  1. Journal entry:
    Journal Entry 1
    Interest Expense 11,492
    Discount 2,492
    Cash 9,000
  2. The carrying value is 388,122

The Rest Of The Practice Problems

Click Here to View All Chapter 10 Problems at Once View
1 Bond Theory Multiple Choice Easy
2 Bond Issue Prices Moderate
3 Contingent Liabilities Moderate
4 Contingent Liabilities - Warranties Moderate
5 Coupon and Market Rates Multiple Choice Moderate
6 Bond Amortization
You are here. 		Hard
7 Bond Retirement Hard

Chapter 10 Videos

1 Intro to Bonds 10:04
2 Discounts and Premiums 7:34
3 Selling at a Discount 7:15
4 Selling for a Premium 8:11
5 Amortization 21:42
6 Borrowing Cost 6:33
7 Interacting with Market Rates 5:30
8 Retiring Bonds 9:54
9 Contingencies 5:58