Question

Bonds Payable (CLO2) O'Malley Company issued $800,000 of 8% bonds on January 1, 2021 for $785,124 due on December 31 , 2024. The interest is to be paid twice a year on December 31 and June 30 . The bonds were sold to yield 10% effective annual interest O'Malley Company closes its books annually on December 31 Instructions (a) Complete the amortization schedule for the period from January 1, 2021 to December 31,2021.

Answer 1

To complete the amortization schedule for the period from January 1, 2021, to December 31, 2021, calculate the semi-annual interest payment, adjust the carrying value of the bond, and record the interest expense. The bond was issued at a discount, so the carrying value will increase over time until it reaches the face value at maturity.

Step-by-step explanation:

To complete the amortization schedule for the period from January 1, 2021, to December 31, 2021, we need to calculate the semi-annual interest payment, adjust the carrying value of the bond, and record the interest expense. The bond was issued at a discount, so the carrying value will increase over time until it reaches the face value at maturity. Here is the amortization schedule:

1. January 1, 2021:
   1. Carrying value = $785,124Interest expense = Carrying value * Annual interest rate / 2 = $785,124 * 0.10 / 2 = $39,256.20Carrying value after interest payment = Carrying value + Interest expense = $785,124 + $39,256.20 = $824,380.20June 30, 2021:Carrying value = $824,380.20Interest expense = Carrying value * Annual interest rate / 2 = $824,380.20 * 0.10 / 2 = $41,219.01Carrying value after interest payment = Carrying value + Interest expense = $824,380.20 + $41,219.01 = $865,599.21