On January 1, 2024, Reyes Recreational Products issued $125,000, 10%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $117,237 to yield an annual return of 12%. Required: 1. Prepare an amortization schedule that determines interest at the effective interest rate. 2. Prepare an amortization schedule by the straight-line method. 3. Prepare the journal entries to record interest expense on June 30, 2026, by each of the two approaches. 5. Assuming the market rate is still 12%, what price would a second investor pay the first investor on June 30, 2026, for $15,000 of the bonds? Prepare an amortization schedule that determines interest at the effective interest rate. Note: Enter your answers in whole dollars. Payment Number 1 2 3 4 5 6 7 Show Transcribed Text Payment Number Cash Payment 1 2 3 4 5 6 7 Effective Interest Prepare an amortization schedule by the straight-line method. Note: Do not round intermediate calculations. Enter your answers in whole dollars. Carrying Value Cash Payment Increase in Balance Recorded Increase in Interest Balance Show Transcribed Text Carrying Value S 118,021 118,852 119,734

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On January 1, 2024, Reyes Recreational Products issued $125,000, 10%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $117,237 to yield an annual return of 12%.

**Required:**

1. Prepare an amortization schedule that determines interest at the effective interest rate.
2. Prepare an amortization schedule by the straight-line method.
3. Prepare the journal entries to record interest expense on June 30, 2026, by each of the two approaches.
5. Assuming the market rate is still 12%, what price would a second investor pay the first investor on June 30, 2026, for $15,000 of the bonds?

### Amortization Schedule at Effective Interest Rate

This schedule calculates interest using the effective interest rate method. 

**Note:** Enter your answers in whole dollars.

| Payment Number | Cash Payment | Effective Interest | Increase in Balance | Carrying Value |
|----------------|--------------|--------------------|---------------------|----------------|
|                |              |                    |                     | $118,021        |
| 1              |              |                    |                     | $118,852        |
| 2              |              |                    |                     | $119,734        |
| 3              |              |                    |                     |                |
| 4              |              |                    |                     |                |
| 5              |              |                    |                     |                |
| 6              |              |                    |                     |                |
| 7              |              |                    |                     |                |

### Amortization Schedule by Straight-Line Method

This schedule uses the straight-line method to calculate interest.

**Note:** Do not round intermediate calculations. Enter your answers in whole dollars.

| Payment Number | Cash Payment | Recorded Interest | Increase in Balance | Carrying Value |
|----------------|--------------|--------------------|---------------------|----------------|
| 1              |              |                    |                     |                |
| 2              |              |                    |                     |                |
| 3              |              |                    |                     |                |
| 4              |              |                    |                     |                |
| 5              |              |                    |                     |                |
| 6              |              |                    |                     |                |
| 7              |              |                    |                     |                |
Transcribed Image Text:On January 1, 2024, Reyes Recreational Products issued $125,000, 10%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $117,237 to yield an annual return of 12%. **Required:** 1. Prepare an amortization schedule that determines interest at the effective interest rate. 2. Prepare an amortization schedule by the straight-line method. 3. Prepare the journal entries to record interest expense on June 30, 2026, by each of the two approaches. 5. Assuming the market rate is still 12%, what price would a second investor pay the first investor on June 30, 2026, for $15,000 of the bonds? ### Amortization Schedule at Effective Interest Rate This schedule calculates interest using the effective interest rate method. **Note:** Enter your answers in whole dollars. | Payment Number | Cash Payment | Effective Interest | Increase in Balance | Carrying Value | |----------------|--------------|--------------------|---------------------|----------------| | | | | | $118,021 | | 1 | | | | $118,852 | | 2 | | | | $119,734 | | 3 | | | | | | 4 | | | | | | 5 | | | | | | 6 | | | | | | 7 | | | | | ### Amortization Schedule by Straight-Line Method This schedule uses the straight-line method to calculate interest. **Note:** Do not round intermediate calculations. Enter your answers in whole dollars. | Payment Number | Cash Payment | Recorded Interest | Increase in Balance | Carrying Value | |----------------|--------------|--------------------|---------------------|----------------| | 1 | | | | | | 2 | | | | | | 3 | | | | | | 4 | | | | | | 5 | | | | | | 6 | | | | | | 7 | | | | |
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