(Learning Objective 1: Issue bonds payable (discount), pay and accrue interest,and amortize bond discount using the straight-line method) On January 31, 2018, DunkinLogistics, Inc., issued five-year, 3% bonds payable with a face value of $8,000,000. The bondswere issued at 93 and pay interest on January 31 and July 31. Dunkin Logistics amortizes bonddiscounts using the straight-line method. Record (a) the issuance of the bonds on January 31,2018, (b) the semiannual interest payment and amortization of the bond discount on July 31,2018, and (c) the interest accrual and discount amortization on December 31, 2018.E9-16A. (Learning Objective 1: Measure cash amounts for a bond payable (premium);amortize bond premium using the straight-line method) Perry Bank has $450,000 of 9%debenture bonds outstanding. The bonds were issued at 105 in 2018 and mature in 2038. Thebonds have annual interest payments.Requirements1. How much cash did Perry Bank receive when it issued these bonds?2. How much cash in total will Perry Bank pay the bondholders through the maturity date ofthe bonds?3. Calculate the difference between your answers to requirements 1 and 2. This differencerepresents Perry Bank’s total interest expense over the life of the bonds.4. Compute Perry Bank’s annual interest expense using the straight-line amortization method.Multiply this amount by 20. Your 20-year total should be the same as your answer torequirement 3.
(Learning Objective 1: Issue bonds payable (discount), pay and accrue interest,
and amortize bond discount using the straight-line method) On January 31, 2018, Dunkin
Logistics, Inc., issued five-year, 3% bonds payable with a face value of $8,000,000. The bonds
were issued at 93 and pay interest on January 31 and July 31. Dunkin Logistics amortizes bond
discounts using the straight-line method. Record (a) the issuance of the bonds on January 31,
2018, (b) the semiannual interest payment and amortization of the bond discount on July 31,
2018, and (c) the interest accrual and discount amortization on December 31, 2018.
E9-16A. (Learning Objective 1: Measure cash amounts for a bond payable (premium);
amortize bond premium using the straight-line method) Perry Bank has $450,000 of 9%
debenture bonds outstanding. The bonds were issued at 105 in 2018 and mature in 2038. The
bonds have annual interest payments.
Requirements
1. How much cash did Perry Bank receive when it issued these bonds?
2. How much cash in total will Perry Bank pay the bondholders through the maturity date of
the bonds?
3. Calculate the difference between your answers to requirements 1 and 2. This difference
represents Perry Bank’s total interest expense over the life of the bonds.
4. Compute Perry Bank’s annual interest expense using the straight-line amortization method.
Multiply this amount by 20. Your 20-year total should be the same as your answer to
requirement 3.
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