Question

In the following independent case, the company closes its books on December 31

Sarasota Co. sells $440,000 of 12% bonds on June 1, 2020. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2024. The bonds yield 8%. On October 1, 2021, Sarasota buys back $140,800 worth of bonds for $147,800 (includes accrued interest). Give entries through December 1, 2022.

Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Round answers to 0 decimal places, e.g. 38,548.)* Difference due to rounding

Prepare all of the relevant journal entries from the time of sale until December 31, 2022. (Assume that no reversing entries were made.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Jun 1, 20 4,99,248 Cash Bonds Payable Premium on Bonds Payable 4,40,000 59,248 Maturity value of bonds payable Present value of $440,000 due in 7 periods at 6% Present value of interest payable semiannually Proceeds from sale of bonds Premium on bonds payable $4,40,000 3,21,504 1,77,744 4,99,248 $59,248 Dec 1, 20 Interest Expense 19,970 Premium on Bonds Payable 6.430|| Cash [$4,40,000 12.00% < (6/12 mos)] 26,400 Note: Amortization table is semi-annual, interest rate is stated as annual value. 21 14 Dec 31, 14 2851 linterest Eynence 1919 713 x (1/6 mosll Interest Expense ($19,713 (1/6 mos) 3 Premium on Bonds Payable ($6,687 x (1/6 mos)] Interest Payable ($4,40,000 12.00% < (4/12 mos) | 1,115|| T 4 ,400 Jun 1, 15 Interest Expense ($19,713 < (5/6 mos) Interest Payable [$4,40,000 12.00% < (4/12 mos) Premium on Bonds Payable ($6,687 < (5/6 mos) Cash [$4,40,000 x 12% < (5/12 mos)] 16,427 4,400 5,573 26.400 Oct 1, 15 Interest Expense ($ 19,445 x 0.32 < (4/6 mos)] Premium on Bonds Payable [$6,955 x 0.32 (4/6 mos Cash [$4,40,000 x 0.32 x 12% < (4/12 mos)] 4,148) 1,484 5.632 Oct 1, 15 1,40,800| 13,278 Bonds Payable Premium on Bonds Payable [$46,131 x 0.32 - $1,484) Gain on Redemption of Bonds Payable Cash ($4,40,000 x 0.32 x 12% < (4/12 mos)] 11,910 1,42,168 Net carrying amount of bonds redeemed - Par value Unamortized premium 1,40,800 13.278 1,54,078 1,42,168 $11,910 L Reacquisition price Gain on redemption Dec 1, 15 Interest Expense ($19,445 0.68) Premium on Bonds Payable ($6,955 x 0.68) Cash [$2,99,200 x 12.00% < (6/12 mos)] 13,223 4,729 17,952 Dec 31, 15 Interest Expense ($19,167 x 0.68 < (1/6 mos) Premium on Bonds Payable ($7,233 x 0.68 < (1/6 mos Interest Payable ($2,99,200 x 12.00% < (1/12 mos) | 2,172 820 2,992 Jun 1, 16 Interest Expense ($19,167 x 0.68 < (5/6 mos)] Interest Payable ($2,99,200 x 12.00% x (1/12 mos)] Premium on Bonds Payable [$7,233 x 0.68 < (5/6 mos Cash [$2,99,200 x 12.00% < (6/12 mos)] 10.861 2,992 4,099 17,952 Dec 1, 16 Interest Expense ($18,878 x 0.68) Premium on Bonds Payable ($7,522 x 0.68) Cash [$2,99,200 x 12.00% < (6/12 mos)] 12,837 5,115 17.952 Schedule of Bond Discount Amortization Effective Interest Method 12% Bonds Sold to Yield 8% Cash Paid Interest Expense Bond Premium Date Jun 1, 20 Dec 1, 20 Jun 1, 21 Dec 1, 21 Jun 1, 22 Dec 1, 22 Jun 1, 23 Dec 1, 23 Jun 1, 24 26,400 26,400 26,400 26.400 26,400 26,400 26,400 26,4001 19,970 19,713 19,445 19.167 18,878 18,577| 18,264 17,938 6,430 6,687 6,955 7.2331 7,522 7,823 8,136 8,462 Carrying Value of Bonds 4,99,248 4,92,818 4,86, 131 4,79,176 4,71,943| 4,64,421 4,56,598 4,48,462 4,40,000 1,0