Question

Cullumber Co. sells $467,000 of 10% 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 decimal places, e.g. 38,548.) Schedule of Bond Discount Amortization Effective-Interest Method Bonds Sold to Yield Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds Date

Answer 1

Answer:

$467,000 5.000% 3 Face Value: 4 Stated Rate: 5 Maturity Period (Years): 6 Payment Frequency/Year: 7 Market Rate/Effective Rate: 8 Issue Price: 6.000% $440,930.28 --PV($C$7/$C$6,$C$5*$C$6,$C$3*($C$4/$C$6),$C$3)

Debit Balance Interest Payment Interest Expense Amortization of in Discount on Credit Balance in Book Value or (Stated Rate x Face (Effective Rate x Discount on Bonds Bonds Payable Bonds Payable Carrying Value of Payment No. Value) Carrying Value) Payable Account Account account the Bonds Debit Interest Credit Discount on Credit Cash account Expenses account Bonds Payable account 3/1/2020 26069.72 $467,000 $440,930.28 9/1/2020 $23,350 $26,455.82 3105.82 22963.90 $467,000 $444,036.10 3/1/2021 $23,350 $26,642.17 3292.17 19671.74 $467,000 $447,328.26 9/1/2021 $23,350 $26,839.70 3489.70 16182.04 $467,000 $450,817.96 3/1/2022 $23,350 $27,049.08 3699.08 12482.97 $467,000 $454,517.03 9/1/2022 $23,350 $27,271.02 3921.02 8561.94 $467,000 $458,438.06 3/1/2023 $23,350 $27,506.28 4156.28 4405.66 $467,000 $462,594.34 9/1/2023 $23,350 $27,755.66 4405.66 0.00 $467,000 $467,000.00

Date	Account Name	Debit	Credit
3/1/2020	Cash	$          440,930
	Discount on bond payable	26,070
	Bonds payable		$       467,000
9/1/2020	Interest expense	26,456
	Discount on bond payable		3,106
	Cash		23,350
3/1/2021	Interest expense	26,642
	Discount on bond payable		3,292
	Cash		23,350
9/1/2021	Interest expense	26,840
	Discount on bond payable		3,490
	Cash		23,350
3/1/2022	Interest expense	27,049
	Discount on bond payable		3,699
	Cash		23,350
9/1/2022	Interest expense	27,271
	Discount on bond payable		3,921
	Cash		23,350
3/1/2023	Interest expense	27,506
	Discount on bond payable		4,156
	Cash		23,350
9/1/2023	Interest expense	27,556
	Discount on bond payable		4,406
	Cash		23,350