Tina's Wear issued 10-year bonds with a face value of 50,000. The ...

[jeatrice]

Tina's Wear issued 10-year bonds with a face value of 50,000. The bonds carry a 7 stated interest rate and pay interest once a year. They were issued when the market interest rate was 8 and sold for 46,644.78.
 
  Required:
  a. Complete the amortization schedule for the first two years of the bond issue using the effective interest method.
   Beginning carrying value Cash payment Interest expense Amortization of discount Ending carrying value
  Year 1 46,644.78
  Year 2
 
  b. Put an X in the appropriate box to describe how each of these items will behave with each additional interest payment:
   Increase Decrease Remain the same
  1 Cash payment for interest
  2 Interest expense
  3 Bond carrying value
 
  c. Fill in the correct dollar amounts:
  At maturity, after the last interest payment has been made, the unamortized discount on the bonds will be ________ and the carrying value of the bonds will be ________.

Question 2

The source document of a sales transaction is called a
 a. sales ticket.
   b. sales return.
   c. purchase order.
   d. purchase receipt.

[jessofishing]

Answer to Question 1

a.
Beginning carrying value Cash payment Interest expense Amortization of discount Ending carrying value
Year 1 46,644.78 3,500
50,000 x .07 3,731.58
46,644.78 x .08 231.58
3,500 - 3,731.58 46,876.36
46,644.78 + 231.58
Year 2 46,876.36
Same as Year 1 End 3,500
50,000 x .07 3,750.11
46,876.36 x .08 250.11
3,500 - 3,750.11 47,126.47
46,876.36 + 250.11

b. Put an X in the appropriate box to describe how each of these items will behave with each additional interest payment:
Increase Decrease Remain the same
1 Cash payment for interest X
2 Interest expense X
3 Bond carrying value X

c. 0; 50,000

Answer to Question 2

a