Chapter 10 Liabilities 4732.
2007
June 30 Cash 1,724,703
Discount on Bonds Payable 275,297
Bonds Payable 2,000,000
Dec. 31 Interest Expense 100,000
Cash 100,000
31 Interest Expense 9,177
Discount on Bonds Payable 9,177
2008
June 30 Interest Expense 100,000
Cash 100,000
31 Interest Expense 9,177
Discount on Bonds Payable 9,177
Dec. 31 Interest Expense 100,000
Cash 100,000
31 Interest Expense 9,177
Discount on Bonds Payable 9,177
2014
June 30 Bonds Payable 2,000,000
Loss on Redemption of Bonds Payable 176,819**
Discount on Bonds Payable 146,819*
Cash 2,030,0003. 2007—$109,177
2008—$218,354
- Initial carrying amount of bonds $1,724,703
Discount amortized on December 31, 2007 9,177
Discount amortized on December 31, 2008 18,354
Carrying amount of bonds, December 31, 2008 $1,752,234
SELF-STUDY QUESTIONS Answers at end of chapter
- A business issued a $5,000, 60-day note to a supplier,
which discounted the note at 12%. The proceeds are:
A. $4,400.
B. $4,900.
C. $5,000.
D. $5,100.
2. Which of the following taxes are employers usually not
required to withhold from employees?
A. Federal income tax
B. Federal unemployment compensation tax
C. Medicare tax
D. State and local income taxes
* Calculation of Unamortized Bond Discount on June 30, 2014
Unamortized discount on June 30, 2007 $ 275,297
Semiannual discount amortization $9,177
Number of years since issuance (2007 to 2014) 7 years
Two semiannual periods per year 2 years
Discount amortization between June 30, 2007, and June 30, 2014 128,478
Unamortized discount on June 30, 2014 $ 146,819
** Calculation of Loss on Redemption of Bonds Payable
Bonds payable $2,000,000
Less: Unamortized bond discount on June 30, 2014 146,819
Carrying value of bonds redeemed on June 30, 2014 $1,853,181
Cash required to redeem the bonds 2,030,000
Loss on redemption of bonds payable $ 176,819