Business, 25.01.2021 21:00, maddy6882

Devon Harris Company sells 10% bonds having a maturity value of $2,000,000 for $1,855,816. The bonds are dated January 1, 2020, and mature January 1, 2025. Interest is payable annually on January 1. Set up a schedule of interest expense and discount amortization under the straight-line method

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Based on the information given, it should be noted that the Cash Interest, Discount amortized and Interest Expenses will be $20,000, $28836.80, and $228836.80 respectively.

Interest expense

From the information given, the following can be calculated:

Discount on issue = $2000000 - $1855816 = $144184

Discount to be amortized on each interest date = $144184 / 5 = $28836.80

Cash interest annual = $2000000 * 10% = $200000

Therefore, the Cash Interest, Discount amortized and Interest Expenses from 2020 to 2025 will be $20,000, $28836.80, and $228836.80 respectively.

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answered: eve2055

Devon Harris Company

Schedule of Interest Expense and Discount Amortization under the straight-line method:

Time Cash Interest Interest Expense Amortization Carrying Amount

0 N/A N/A N/A $1,855,816

1 $200,000 $228,836.80 $28,836.80 $1,884,652.60

2 $200,000 $228,836.80 $28,836.80 $1,913,489.40

3 $200,000 $228,836.80 $28,836.80 $1,942,326.20

4 $200,000 $228,836.80 $28,836.80 $1,971,163.00

5 $200,000 $228,836.80 $28,837.00 $2,000,000

Explanation:

a) Data and Calculations:

10% Bonds' maturity value = $2,000,000

Bonds sales value = $1,855,816

Total discount = $144,184

Annual Interest = $200,000 ($2,000,000 * 10%)

Maturity period = 5 years (January 1, 2020 to January 1, 2025)

Annual amortization of discount = $28,836.80 ($144,184/5)

Total interest cost with amortized discount each year = $228,836.80

b) Under the straight line method, the premium or discount on the bond is amortized in equal amounts over the life of the bond, as demonstrated above.

answered: Guest

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answered: Guest

1) d 2) d 3) c 4) d 5) a 6) c 7) a 8) b 9) a 10) a 11) d 12) c 13) c 14) d 15) a 16) a 17) d 18) c 19) c 20) c

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Devon Harris Company sells 10% bonds having a maturity value of $2,000,000 for $1,855,816. The bonds...