Question

Problem 14-02 Riverbed Co. is building a new hockey arena at a cost of $2,620,000. It received a downpayment of $480,000 from local businesses to support the project, and now needs to borrow $2,140,000 to complete the project. It therefore decides to issue $2,140,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 11%. Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O 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.) Debit Credit Date Account Titles and Explanation January 1, 2019 Cash 2266055 Premium on Bonds Pay 126055 Bonds Payable 2140000 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare a bond amortization schedule up to and including January 1, 2023, using the effective interest method. (Round answers to 0 decimal places, e.g. 38,548.) Cash Paid Interest Expense Premium Amortization Carrying Amount of Bonds Date 1/1/19

Answer 1

In the Present question :-
Principal	2140000
Coupon rate	12.00%
Period	10
Yeild Rate	11.00%
Yearly Interest	$256,800.00	(2140000*12%)
Payment and Discounting Chart is as follows:-
1	0.90090	$256,800.00	$231,351.12
2	0.81162	$256,800.00	$208,424.02
3	0.73119	$256,800.00	$187,769.59
4	0.65873	$256,800.00	$169,161.86
5	0.59345	$256,800.00	$152,397.96
6	0.53464	$256,800.00	$137,295.55
7	0.48166	$256,800.00	$123,690.29
8	0.43393	$256,800.00	$111,433.22
9	0.39092	$256,800.00	$100,388.26
10	0.35218	$2,396,800.00	$844,105.02
		TOTAL	$2,266,016.90
1.)
Date	Account Titles & Explanation			Debit	Credit
1-Jan-19	Cash			$2,266,016.90
	Premium on Bonds Ammortization				$126,016.90
	Bonds Payable				$2,140,000.00
	(Cash Received for Bonds)
2.)
Bond Ammortization Schedule would be
A	B	C	D	E	F	G
	Interest Pmt.	Interest	Premium	Credit Bal.	Credit Bal.	Carrying Amount
	Cash Paid	Expense	Ammortization	in the account	in the account	of Bonds
	12% * Face	Mkt 11 % * G	C minus B	Bond Premium	Bonds Payable	F Minus E
01/01/2019	$0.00	$0.00	$0.00	-$126,016.90	$2,140,000.00	$2,266,016.90
1-Jan-2020	$256,800.00	$249,261.86	-$7,538.14	-$118,478.75	$2,140,000.00	$2,258,478.75
01/01/2021	$256,800.00	$248,432.66	-$8,367.34	-$110,111.42	$2,140,000.00	$2,250,111.42
01/01/2022	$256,800.00	$247,512.26	-$9,287.74	-$100,823.67	$2,140,000.00	$2,240,823.67
01/01/2023	$256,800.00	$246,490.60	-$10,309.40	-$90,514.28	$2,140,000.00	$2,230,514.28
01/01/2024	$256,800.00	$245,356.57	-$11,443.43	-$79,070.85	$2,140,000.00	$2,219,070.85
01/01/2025	$256,800.00	$244,097.79	-$12,702.21	-$66,368.64	$2,140,000.00	$2,206,368.64
01/01/2026	$256,800.00	$242,700.55	-$14,099.45	-$52,269.19	$2,140,000.00	$2,192,269.19
01/01/2027	$256,800.00	$241,149.61	-$15,650.39	-$36,618.80	$2,140,000.00	$2,176,618.80
01/01/2028	$256,800.00	$239,428.07	-$17,371.93	-$19,246.87	$2,140,000.00	$2,159,246.87
01/01/2029	$256,800.00	$237,517.16	-$19,246.87	$0.00	$2,140,000.00	$2,140,000.00
Fields Highlighted in Bold are to be filled
3.)
Journal entries to record the Bond's retirement
Date	Description			Amount(Dr.)	Amount(Cr.)
1st July	Interest expense on Bonds			$64,200.00
2022	Cash/Bank				$64,200.00
	(Interest Paid for half of the bonds to be
	redeemed-(1070000*12%*6/12)
1st July	Bonds Payable			$1,070,000.00		(2140000*0.5)
2022	Premium on Bond Ammortization			$50,411.84		(100823.67*0.5)
	Loss on Bond Retirement			$31,988.16		(1152400-50411.84-1070000)
	Cash/Bank				$1,152,400.00
	(Being Bonds Retired on 1st of July 2022)

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