## Answers

**Requirement 1:**

Date | Cash Paid | InterestExpense | Increase inCarrying Value | CarryingValue |

1/1/2021 | $473,852 | |||

12/31/2021 | $31,800 | $33,170 | $1,370 | $475,222 |

12/31/2022 | $31,800 | $33,266 | $1,466 | $476,687 |

Cash paid = $530,000 face value x 6% = $31,800

Interest expense = Preceding carrying value x 7% market rate

Increase in carrying value = Interest expense - Cash paid

Carrying value = Preceding carrying value + Increase in carrying value

**Requirement 2:**

Date | Account title and explanation | Debit | Credit |

January 01,2012 | Cash | $473,852 | |

Discount on bonds payable | $56,148 | ||

Bonds payable | $530,000 | ||

[To record issuance of bonds] | |||

December 31,2021 | Interest expense | $33,170 | |

Discount on bonds payable | $1,370 | ||

Cash | $31,800 | ||

[To record the first annual interest payment] | |||

December 31,2021 | Interest expense | $33,266 | |

Discount on bonds payable | $1,466 | ||

Cash | $31,800 | ||

[To record the first annual interest payment] |

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