(CH10-Q1): Accounting for Bonds Payable (7 points total)
Starbucks' Corporation issued $200,000 of bonds with a 10-year maturity on January 1, 2024. The following is a
partial bond amortization schedule for the bonds that the company's accountant prepared.
Date
Cash interest
Effective interest
Change in balance
Outstanding balance
1/1/2024
207,020
6/30/2024
7,000
6,211
789
206,230
12/31/2024
7,000
6,187
813
205,417
6/30/2025
7,000
6,163
837
204,580
12/31/2025
7,000
6,137
(?)
(?)
6/30/2026
-
-
-
-
12/31/2026
-
-
-
-
6/30/2027
-
-
-
-
12/31/2027
-
-
-
-
Required:
1. (1.5 pts) What is the stated annual rate of interest on the bond?
2. (1.5 pts) What is the interest expense to be recorded on December 31, 2025?
3. (4 pts) Let's assume that Starbucks' Corporation decided to call the entire bonds at a call premium of 3
percent over par on January 1, 2026. Prepare the journal entry to record the retirement of the bonds.