Question

(Amortization Schedule—Straight-Line) Devon Harris Company sells 10% bonds having a maturity value of \(2,000,000 for \)1,855,816. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.

Instructions

Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to the nearest cent.)

Short answer

The discount amortized each year totals $28,836.8.

Step-by-step solution

Definition of Bond Payable

Bond payable can be defined as the securities that are issued by the business to creditors for generating cash. It is reported as the non-current liability of the business entity.

Schedule of interest expense and discount amortization

Year	Cash interest	Amortization	Interest expenses	Bond payable	Carrying amount
0				$2,000,000	$1,855,816
1	$200,000	$28,836.8	$228,836.8	$2,000,000	$1,884,652.8
2	$200,000	$28,836.8	$228,836.8	$2,000,000	$1,913,489.6
3	$200,000	$28,836.8	$228,836.8	$2,000,000	$1,942,326.4
4	$200,000	$28,836.8	$228,836.8	$2,000,000	$1,97116.2
5	$200,000	$28,836.8	$228,836.8	$2,000,000	$2,000,000