Question

Presented below are selected transactions on the books of Cullumber Corporation.

May 1, 2017		Bonds payable with a par value of $861,600, which are dated January 1, 2017, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 11% (payable annually at January 1), and mature January 1, 2027. (Use interest expense account for accrued interest.)
Dec. 31		Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.)
Jan. 1, 2018		Interest on the bonds is paid.
April 1		Bonds with par value of $344,640 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.)
Dec. 31		Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.

Prepare journal entries for the transactions above. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answers 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.)

Date	Account Titles and Explanation	Debit	Credit
May 1, 2017Dec. 31, 2017Jan. 1, 2018April 1, 2018Dec. 31, 2018
May 1, 2017Dec. 31, 2017Jan. 1, 2018April 1, 2018Dec. 31, 2018
	(To record the interest)
	(To amortize the premium)
May 1, 2017Dec. 31, 2017Jan. 1, 2018April 1, 2018Dec. 31, 2018
Apr. 1, 2018
May 1, 2017Dec. 31, 2017Jan. 1, 2018April 1, 2018Dec. 31, 2018
	(To record the interest)
	(To amortize the premium)

Answer 1

Date	Account title	Debit	credit
May 1 2017	cash	944888
	Interest expense		31592
	Premium on bond payable		51696
	Bond payable		861600
Dec 31	Interest expense (861600*11%)	94776
	Interest payable		94776
Dec 31	Premium on bond payable	3565
	Interest expense		3565
Jan 1 2018	Interest payable	94776
	cash		94776
April 1	Bond payable	344640
	Premium on bond payable	18175
	Interest expense	9478
	Cash (344640*102/100)		351533
	Gain on redemption of bond		20760
Dec 31	Interest expense	57966
	Interest payable (526960*11%)		57966
Dec 31	Premium on bond payable	3795
	Interest expense (3276+519 )		3795

working:

May 1)Issue price = 861600*106 /100 = 913296

Premium on bond payable = 913296 -861600 = 51696

Interest is accrued for 4 months (1Jan -1May ) = 861600*11%*4/12 = 31592

Dec 31)Years to maturity = 1 May 2017 - 1 Jan 2027 = 116 months

Amortization of premium per month = 51696 /116 =$ 445.655172 per month

Amortization on Dec 31 2017 = 8 months *445.65517 = 3565 [1 May -31 Dec]

1 April 2018 )

Interest is accrued for 3 months : 344640*11%*3/12 = 9478

Un-amortized Bond premium as on 1 Jan 2018 51696 - 3565 48131 on 861600 par value bonds		Total amortization for 2018
Premium on 334640 bond to retired 48131*334640/861600 18694	premium on remaining 861600-334640 retired= 526960 bonds 48131 *526960/861600 29437
3 months amortization on bond retired: 18694 *3/108 = 519	per month amortization of bond premium :29437 /108 = 273 or 273*12= 3276	3795
Premium remaining : 18694 -519= 18175

Months left to maturity (1 Jan 2018 -1J an 2027 ) = 9 years *12 = 108