Calculate the effective annual interest rate on the bonds

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Reference no: EM13940955

COMPLETING A BOND AMORTIZATION TABLE (EFFECTIVE INTEREST RATE METHOD)

Cagney Company sold $200,000 of bonds on June 30, 2010. A portion of the amortiza- tion table appears below.

Period	Cash Payment (Credit)	Interest Expense (Debit)	Discount on Bonds Payable (Credit)	Discount on Bonds Payable Balance	Carrying Value
12/31/11	$9,000	$9,277	$277	$2,340	$197,660
6/30/12	9,000	9,290	290	2,050	197,950
12/31/12	?	?	?	?	?

Required:

1. Indicate the stated interest rate on these bonds.

2. Calculate the effective annual interest rate on these bonds (rounded to the nearest 0.1 percent).

3. Determine the interest expense and discount amortization for the interest period ending December 31, 2012.

4. Determine the liability balance after the interest payment is recorded on December 31, 2012.

Reference no: EM13940955

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