8391888 Solution 2

The fiscal year ends December 31 for Lake Hamilton Development. To provide funding for its Moonlight Bay project, LHD issued 5% bonds with a face amount of $500,000 on November 1, 2013. The bonds sold for $442,215, a price to yield the market rate of 6%. The bonds mature October 31, 2033 (20 years). Interest is paid semiannually on April 30 and October 31.

1.
What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2013? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

Interest expense $ 4,422

2.
What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2013? (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Bonds payable $ 442,470
Interest payable $ 4,167

3.
What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2014? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

Interest expense $ 26,571

4.
What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2014? (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Bonds payable $ 444,042
Interest payable $ 4,167

The Amortization table has been prepared as given below to show the computation.

Date
Amount due
Interest paid at 5%
Interest expense at 6%
Discount amortized
Discount Unamortized
Book Value
2013

57,785
442,215
Dec. 31
442,215
4,167
4,422
255
57,530
442,470
2014

Apr . 01
442,470
8,333
8,844
511
58,041
442,982
Oct. 31
442,982
12,500
13,289
789
57,251
443,771
Dec. 31
443,771
4,167
4,438
271
56,981
444,042