(Learning Objective 2: Accounting for bonds payable at a discount and amortizing by the straight line method)
- Journalize the following transactions of Trekker Boot Company:
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2007 |
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Jan. 1 |
Issued $500,000 of 8%, 10 year bonds payable at 97. |
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July 1 |
Paid semiannual interest and amortized bonds by the straight line method on the 8% bonds payable. |
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Dec. 31 |
Accrued semiannual interest expense and amortized bonds by the straight line method on the 8% bonds payable. |
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2008 |
|
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Jan. 1 |
Paid semiannual interest. |
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2017 |
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|
Jan. 1 |
Paid the 8% bonds at maturity. |
2. At December 31, 2007, after all year end adjustments, determine the carrying amount of Trekker’s bonds payable, net.
3. For the 6 months ended July 1, 2007, determine for Trekker:
a. Interest expense b. Cash interest paid
What causes interest expense on the bonds to exceed cash interest paid?