@jmc0434, I think I can help you with this. So they are asking for the BP at the end of the year not the beginning of the year using “Effective Interest Method” since you know the Actual rate and Market Rate. You would calculate this as follows:
To first calculate initial debt, you always calculate as PV of Outstanding debt + PV of Interest Payments
100,000 x .68058 = 68,058 and (100,000 x .05 = 5,000) — 5,000 x 3.99271 = 19,964
68,058 + 19,964 = 88,022
This would be your answer if it was asking at the beginning of the year, but since it's asking for the end you have to add back the amortization on the discount as such:
100,000 x .05 = 5,000 vs 88,022 x .08 = 7,042 = 7,042 – 5,000 = 2,042
So your answer would be 88,022 + 2,042 = 90,064
In journal entry form it would look like this:
1/1
Cash 88,022
Discount on BP 11,978
Bonds Payable 100,000
12/31
Interest Expense 7,042
Amortization of Discount 2,042
Interest Payable/Cash 5,000
REG: 84 (10/5/15)
AUD: 83 (11/23/15)
BEC: 77 (2/27/16) - The bubble sucks
FAR: 90 (7/20/16) - AND DONE FOREVER!!!!!