MacBride Enterprises sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below. Period Cash Payment (Credit) Interest Expense (Debit) Premium on Bonds Payable (Debit) Premium on Bonds Payable Balance (Credit) Bond Payable Carrying Value (Credit) At issue $6,457 $206,457 06/30/19 $9,000 $8,465 $535 5,922 205,922 12/31/19 9,000 8,443 557 5,365 205,365 06/30/20 9,000 8,420 580 4,785 204,785 12/31/20 ? ? ? ? ? Required: 1. Indicate the stated annual interest rate on these bonds. % 2. Calculate the effective annual interest rate on these bonds. (Note: Round to the nearest 0.1%.)
MacBride Enterprises sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below. Period Cash Payment (Credit) Interest Expense (Debit) Premium on Bonds Payable (Debit) Premium on Bonds Payable Balance (Credit) Bond Payable Carrying Value (Credit) At issue $6,457 $206,457 06/30/19 $9,000 $8,465 $535 5,922 205,922 12/31/19 9,000 8,443 557 5,365 205,365 06/30/20 9,000 8,420 580 4,785 204,785 12/31/20 ? ? ? ? ? Required: 1. Indicate the stated annual interest rate on these bonds. % 2. Calculate the effective annual interest rate on these bonds. (Note: Round to the nearest 0.1%.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Completing a Bond Amortization Table (Effective Interest Rate)
MacBride Enterprises sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below.
Period |
Cash Payment (Credit) |
Interest Expense (Debit) |
Premium on Bonds Payable (Debit) |
Premium on Bonds Payable Balance (Credit) |
Bond Payable Carrying Value (Credit) |
|||||
| At issue | $6,457 | $206,457 | ||||||||
| 06/30/19 | $9,000 | $8,465 | $535 | 5,922 | 205,922 | |||||
| 12/31/19 | 9,000 | 8,443 | 557 | 5,365 | 205,365 | |||||
| 06/30/20 | 9,000 | 8,420 | 580 | 4,785 | 204,785 | |||||
| 12/31/20 | ? | ? | ? | ? | ? |
Required:
1. Indicate the stated annual interest rate on these bonds.
%
2. Calculate the effective annual interest rate on these bonds. (Note: Round to the nearest 0.1%.)
%
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