USING A DISCOUNT AMORTIZATION TABLE (STRAIGHT LINE)
Panamint Candy Company prepared the following amortization table for $500,000 of five-year, 9.2 percent bonds issued and sold by Panamint on December 31, 2009, for $472,000:
|
Period
|
Cash Payment (Credit)
|
Interest Expense (Debit)
|
Discount on Bonds Payable (Credit)
|
Discount on Bonds Payable Balance
|
Carrying Value
|
|
|
|
|
|
$28,000
|
$472,000
|
|
6/30/10
|
$23,000
|
$25,800
|
$2,800
|
25,200
|
474,800
|
|
12/31/10
|
23,000
|
25,800
|
2,800
|
22,400
|
477,600
|
|
6/30/11
|
23,000
|
25,800
|
2,800
|
19,600
|
480,400
|
|
12/31/11
|
23,000
|
25,800
|
2,800
|
16,800
|
483,200
|
|
6/30/12
|
23,000
|
25,800
|
2,800
|
14,000
|
486,000
|
|
12/31/12
|
23,000
|
25,800
|
2,800
|
11,200
|
488,800
|
|
6/30/13
|
23,000
|
25,800
|
2,800
|
8,400
|
491,600
|
|
12/31/13
|
23,000
|
25,800
|
2,800
|
5,600
|
494,400
|
|
6/30/14
|
23,000
|
25,800
|
2,800
|
2,800
|
497,200
|
|
12/31/14
|
23,000
|
25,800
|
2,800
|
0
|
500,000
|
Required:
1. Prepare the entry to recognize the sale of the bonds on December 31, 2009.
2. Prepare the entry to recognize the first interest payment on June 30, 2010.
3. Determine the interest expense for these bonds that Panamint will report on its 2012 income statement.
4. Indicate how these bonds will appear in Panamint's December 31, 2013, balance sheet.