Question

The following amortization and interest schedule reflects the issuance of 10-year bonds by Tamarisk Corporation on January 1, 2014, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly. Amortization Schedule Year Cash Interest Amount Unamortized Carrying Value 1/1/2014 $44,819 $ 133,781 2014 $17,860 $20,067 42,612 135,988 2015 17,860 20,398 40,074 138,526 2016 17,860 20,779 37,155 141,445 2017 17,860 21,217 33,798 144,802 2018 17,860 21,720 29,938 148,662 2019 17,860 22,299 25,499 153,101 2020 17,860 22,965 20,394 158,206 2021 17,860 23,731 14,523 164,077 2022 17,860 24,612 7,771 170,829 2023 17,860 25,631 178,600 (a) Indicate whether the bonds were issued at a premium or a discount. select an option DiscountPremium (b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method. select a method Effective interest methodStraight-line method (c) Determine the stated interest rate and the effective-interest rate. (Round answers to 0 decimal places, e.g. 18%.) The stated rate enter percentages rounded to 0 decimal places % The effective rate enter percentages rounded to 0 decimal places % (d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2014. (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 January 1, 2014 enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount (e) On the basis of the schedule above, prepare the journal entry to reflect the bond transactions and accruals for 2014. (Interest is paid January 1.) (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 December 31, 2014 enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount (f) On the basis of the schedule above, prepare the journal entries to reflect the bond transactions and accruals for 2021. Tamarisk Corporation does not use reversing entries. (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 choose a transaction date January 1, 2021December 31, 2021 enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount choose a transaction date January 1, 2021December 31, 2021 enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount

Answer 1

Answer is given below

a) Bonds are issued at discount Face value Issue price Discount on issue of bonds Amount $178,600 $133,781 $44,819 Bond interest rate 10% (17,860/178,600) Effective interest rate 15% ($20,067/133,781)

d) Bond issue Credit Date January 1,2014 Account Titles and explanation Cash Discount on issue of Bonds To Bond payable (To record issue of bonds) Debit $133,781 $44,819 $178,600 e) Bond transactions and accruals for 2014 Credit Debit $37,927 Date Account Titles and explanation December 31, 2014 Interest expense To Discount on issue of Bonds To Interest payable (To record interest payable) $20,067 $17,860 f) Bond transactions and accruals for 2021 Credit Date January 1,2021 Debit $17,860 Account Titles and explanation Interest payable To Cash (To record interest payment) $17,860 Credit Debit $41,591 | Date Account Titles and explanation December 31, 2021 Interest expense To discount on issue of bonds To Interest payable (To record interest payable) $23,731 $17,860