Question

Kleso, Intermediate Accounting, 17e Intermediate Accounting I & II Assignment Gradebook ORION Downloadable eTextbook CALCULATOR FULL SCREEN PRINTER VERSION BACK NER Brief Exercise 14-06 On January 1, 2020. Tamarisk Corporation issued $610,000 of 9% bonds, due in 10 years. The bonds were issued for $571,991, and pay interest each Day 1 and January 1. Tamarisk uses the effective interest method. Prepare the company's journal entries for (a) the January 1 Issuance, (b) the July 1 Interest payment, and (c) the December 31 adjusting entry Assume an effective interest rate of 10% (Round intermediate calculations to 6 decimal places, e.. 1.251247 and final answer to decimal places, e.g. 38,548. If no entry is required, select "No Entry for the account titles and enter for the amounts. Credit accounties are automatically indented when amount is entered. Do not indent manually.) No Date Account Titles and Explanation Debit Credit WERONUDOPER N

Answer 1

First, we have to prepare the discount amortisation schedule:

Here Cash paid is coupon payment = $610,000 * 9% * 6/12 = $27,450
Interest expense = Beginnig carrying amount * 10% * 6/12
Discount amortised = Interest expense - Cash paid
Ending Carrying amount = Beginning carrying amount + Discount amortised

Year Interest Expense Shedule of Discount Amortisation Cash Paid Jan. 1, 2020 Jul. 1, 2020 27,450.00 Jan. 1, 2021 27,450.00 Jul. 1, 2021 27,450.00 $ $ $ 28,599.55 28,657.03 28,717.38 Discount Amortised Carrying amount | $ 5,71,991.00 $ 1,149.55 $ 5,73,140.55 $ 1,207.03 $ 5,74,347.58 $ 1,267.38 $ 5,75,614.96

Journal entries are as follows:-

Here amounts are rounded off to 0 decimal places.

Credit $ Date Account Titles Jan-01 Cash Discount on bonds payable Bonds payable (Recording issuance of bonds) Debit 5,71,991 38,009 $ 6,10,000 $ $ 28,600 1,150 Jul-01 Interest expense Discount on bonds payable Cash (Recording interest expense) $ 27,450 28,657 1,207 Dec-31 Interest expense $ Discount on bonds payable $ Interest payable (Recording interest expense adjusting entry) 27,450