Question

Crane Co. sells $507,000 of 8% bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. Give entries through December 31, 2021.

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.)

Answer 1

Bonds Amortization Schedule Date Cash Interest Paid Bond Interest Expense Discount Amortized Carrying Amount 1/3/2020 $ 450,395 1/9/2020 $ 20,280 $ 27,024 $ 6,744 $ 457,138 1/3/2021 $ 20,280 $ 27,428 $ 7,148 $ 464,287 1/9/2021 $ 20,280 $ 27,857 $ 7,577 $ 471,864 1/3/2022 $ 20,280 $ 28,312 $ 8,032 479,896 1/9/2022 $ 20,280 $ 28,794 $ 8,514 $ 488,409 1/3/2023 $ 20,280 $ 29,305 $ 9,025 $ 497,434 1/9/2023 $ 20,280 $ 29,846 $ 9,566 $ 507,000 Journal Entries Date General Journal 1/3/2020 Cash Discount on bonds payable Bonds Payable $ $ Debit Credit 450,395 56,605 $ 507,000 $ 27,024 1/9/2020 Interest Expense Discount on bonds payable Cash $ 6,744 $ 20,280 $ 18,285 31/12/2020 Interest Expense Discount on bonds payable Interest Payable $ 4,765 $ 13,520 $ $ 9,143 Working Note: Calculate the Issue price of Bonds: Present value of interest payments (507000*8%*6/12)*5.58238 Present value of principal (507000*0.66506) 1/3/2021 Interest Expense Interest Payable Discount on bonds payable Cash 13,520 $ 113,211 $ 2,383 $ 20,280 $ $ 337,184 450,395 $ 27,857 1/9/2021 Interest Expense Discount on bonds payable Cash $ 7,577 $ 20,280 $ 18,875 31/12/2021 Interest Expense Discount on bonds payable Interest Payable $ 5,355 $ 13,520 Note : Please comment down for any further clarifications.