Question

Cheyenne Co. sells $429,000 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, Cheyenne buys back $128,700 worth of bonds for $134,700 (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.)

Answer 1

FACE VALUE	429000
BOND INTEREST RATE	12%
MARKET INTEREST RATE	8%
LIFE OF BOND	4 YEARS
INTEREST PAYMENT	SEMI ANNUALLY
CALCULATION OF PV OF BOND
PRINCIPAL AMOUNT	429000	PV FACTOR FOR 8 SEMI ANNAUL PERIODS AND % MARKET INTEREST RATE								0.7307	313470
INTEREST	25740	PVOA FACTOR FOR 8 SEMI ANNAUL PERIODS AND 4% MARKET INTEREST RATE								6.7327	173300
PRESENT VALUE OF BOND	486770
AMORTIZATION SCHEDULE							JOURNAL ENTRIES
DATE	CASH PAID	INT EXP	AMORTIZATION	CV		DATE	PARTICULARS	DR	CR
01/06/2020				486770		01/06/2020	CASH	486770
01/12/2020	25740	19471	6269	480501			PREMIUM ON BOND		57770
01/06/2021	25740	19220	6520	473981			BOND PAYABLE		429000
01/12/2021	25740	18959	6781	467200			BEING BOND ISSUED ON PREMIUM
01/06/2022	25740	18688	7052	460148
01/12/2022	25740	18406	7334	452814		01/12/2020	BOND INTEREST EXP	19471
01/06/2023	25740	18113	7627	445187			BOND PREMIUM	6269
01/12/2023	25740	17807	7933	437254			CASH		25740
01/06/2024	25740	17490	8254	429000
						Dec-20	BOND INTEREST EXP	3203
							BOND PREMIUM	1087
							BOND INTEREST PAYABLE		4290
						01/06/2021	BOND INTEREST EXP	16268
							BOND INTEREST PAYABLE	4290
PORTION THAT WAS REPAID EARLY							BOND PREMIUM	5182
							CASH		25740
429000		473981
128700	30%	134700	6000			10/01/2021	BOND INTEREST EXP	3592
300300	70%	339281			Add a comment Know the answer? Add Answer to: Cheyenne Co. sells $429,000 of 12% bonds on June 1, 2020. The bonds pay interest on... Your Answer: Post as a guest Your Name: What's your source? Earn Coins Coins can be redeemed for fabulous gifts. Log In Sign Up Post as anonymous Post Your Answer Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free. Similar Homework Help Questions Oriole Co. sells $435,000 of 12% bonds on June 1, 2020. The bonds pay interest on... Oriole Co. sells $435,000 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, Oriole buys back $130,500 worth of bonds for $136,500 (includes accrued interest). Give entries through December 1, 2022. Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. 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