On January 1, Year 1, Reese Incorporated issued bonds with a face value of $170,000, a stated rate of interest of 8 percent, and a five- year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $176,970. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item in the table would appear on the Year 3 balance sheet? c. What item in the table would appear on the Year 3 income statement? d. What item and amount in the table would appear on the Year 3 statement of cash flows (Direct Method) and under which section of the statement of cash flows would this item appear? (For all requirements, round intermediate calculations and final answers to the nearest whole dollar amount.) Complete this question by entering your answers in the tabs below. Req A Req B to D Prepare an amortization table. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals Amortization Schedule Premium Cash Interest Payment Expense Amortization 13,600 13,600 12,388 12,388 1,212 1,212 Carrying Value 176,970 175,758
On January 1, Year 1, Reese Incorporated issued bonds with a face value of $170,000, a stated rate of interest of 8 percent, and a five- year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $176,970. Reese used the effective interest rate method to amortize bond premium. Required a. Prepare an amortization table. b. What item in the table would appear on the Year 3 balance sheet? c. What item in the table would appear on the Year 3 income statement? d. What item and amount in the table would appear on the Year 3 statement of cash flows (Direct Method) and under which section of the statement of cash flows would this item appear? (For all requirements, round intermediate calculations and final answers to the nearest whole dollar amount.) Complete this question by entering your answers in the tabs below. Req A Req B to D Prepare an amortization table. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals Amortization Schedule Premium Cash Interest Payment Expense Amortization 13,600 13,600 12,388 12,388 1,212 1,212 Carrying Value 176,970 175,758
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: accounting
Transcribed Image Text:On January 1, Year 1, Reese Incorporated issued bonds with a face value of $170,000, a stated rate of interest of 8 percent, and a five-
year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time
the bonds were issued. The bonds sold for $176,970. Reese used the effective interest rate method to amortize bond premium.
Required
a. Prepare an amortization table.
b. What item in the table would appear on the Year 3 balance sheet?
c. What item in the table would appear on the Year 3 income statement?
d. What item and amount in the table would appear on the Year 3 statement of cash flows (Direct Method) and under which section of
the statement of cash flows would this item appear?
(For all requirements, round intermediate calculations and final answers to the nearest whole dollar amount.)
Complete this question by entering your answers in the tabs below.
Req A
Req B to D
Prepare an amortization table.
Date
January 1, Year 1
December 31, Year 1
December 31, Year 2
December 31, Year 3
December 31, Year 4
December 31, Year 5
Totals
Amortization Schedule
Premium
Cash
Interest
Payment Expense Amortization
13,600
13,600
12,388
12,388
1,212
1,212
Carrying
Value
176,970
175,758
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