Question

Exercise 14-09 (Part Level Submission) On June 30, 2020, Larkspur Company issued $3,660,000 face value of 13%, 20-year bonds at $3,935,340, a yield of 12%. Larkspur uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. (a) Your answer is correct. Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. 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.) (1) The issuance of the bonds on June 30, 2020. (2) The payment of interest and the amortization of the premium on December 31, 2020. (3) The payment of interest and the amortization of the premium on June 30, 2021. (4) The payment of interest and the amortization of the premium on December 31, 2021. No. Date Account Titles and Explanation Debit Credit (1) June 30, 2020 (2) December 31, 2020 (3) June 30, 2021 (4) December 31, 2021 (b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2021, balance sheet. (Round answers to 0 decimal places, e.g. 38,548.) Larkspur Company Balance Sheet December 31, 2021For the Year Ended December 31, 2021For the Quarter Ended December 31, 2021 Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity $ Discount on Notes PayableCashBook Value of Bonds PayableLoss on Redemption of BondsPremium on Bonds PayableInterest ExpenseNotes PayableInterest PayableNotes ReceivableBad Debt Expense $

Answer 1

Part 1

No.	Date	Account titles and explanation	Debit	Credit
1	June 30, 2020	Cash	3935340
		Bonds payable		3660000
		Premium on bonds payable		275340
2	December 31, 2020	Interest expense (3935340*12%/2)	236120
		Premium on bonds payable	1780
		Cash (3660000*13%/2)		237900
3	June 30, 2021	Interest expense ((3935340-1780)*12%/2)	236014
		Premium on bonds payable	1886
		Cash		237900
4	December 31, 2021	Interest expense ((3935340-1780-1886)*12%/2)	235900
		Premium on bonds payable	2000
		Cash		237900

Part 2

Larkspur Company Balance Sheet December 31, 2021
Long-term Liabilities
Bonds payable	$3660000
Premium on bonds payable	$5666
Book value of bonds payable	$3665666

1780+1886+2000 = 5666