Question

Question y View Policies Current Attempt in Progress interest. Grove Corpo Grove Corporation issued $4,000,000 of x bondson October 1, 2017, due on October 1,2022. The interest is to be paid twice a year on April 1 and October 1. The band were sold to yield 10% effective doses its books annually on December 31 Complete the following amortization schedule for the dates indicated. Use the effective interest methodundan to decid es 52753 Date Credit Cash Debit nterest Expense Credit Bond Discount Carrying Amount of Bonds $5.536.676 October 1, 2017 Apr 1. 2018 October 1, 2018 Sentered. Do not inden manual Prepare the adjusting entry for December 31, 2018 Use the effective interest method Credit account bien utom ly inderted Date Account Titles and Explanation Debit Credit Dec. 31 Compute the interest expense to be reported in the income statement for the year ended December 31, 2018 Interest expense

Answer 1

Answer- 1-A-

	Credit Cash	Debit Interest Expense	Credit Bond Discount	Carrying amount of bonds
October 1, 2017				$5,536,676
April 1, 2018	$240,000	$276,834	$36,834	$5,573,510
October 1, 2018	$240,000	$278,676	$38,676	$5,612,186

2.

Adjusting Entry:

Date	Account Title and Explanation	Debit ($)	Credit ($)
Dec.31	Interest Expense ($5,612,186 × 10% × 3/12)	$140,305
	Interest Payable (1/2 × $240,000)		$120,000
	Discount on Bonds Payable ($140,305 – $120,000)		$20,305
	(To record an adjusting entry for interest expense)

C.

Interest Expense to be Reported = 276834*1/2 + 278676 + 140305 = $557398

2-

Date	Account Title and Explanation	Debit ($)	Credit ($)
Apr 1,	Interest expense	$12000
	Cash ($600000 x 7.5% x 3/12)		$11250
	Discount on bonds payable ($120000 x 1/5 x 1/8 x 3/12)		750
	(To record payment of interest on bonds retired)
Apr 1,	Bonds payable	600000
	Loss on redemption of bonds	29250
	Discount on bonds payable [(1/5 x $120000) - $750]		23250
	Cash ($600000 x 101%)		606000
	(To record the retirement of bonds payable)