Question

Problem 14-01 The following amortization and interest schedule reflects the issuance of 10-year bonds by Crane 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 $49,004 $ 195,096 2014 $26,851 $29,264 46,591 197,509 2015 26,851 29,626 43,816 200,284 2016 26,851 30,043 40,624 203,476 2017 26,851 30,521 36,954 207,146 2018 26,851 31,072 32,733 211,367 2019 26,851 31,705 27,879 216,221 2020 26,851 32,433 22,297 221,803 2021 26,851 33,270 15,878 228,222 2022 26,851 34,233 8,496 235,604 2023 26,851 35,347 244,100 (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. Crane 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 SHOW LIST OF ACCOUNTS LINK TO TEXT Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER

Answer 1

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Part a
Face Value of Bond		$   244,100
Issue price of Bond		$   195,096
Since issue price is lower, bonds were issued at Discount.
Part b
Effective interest method since amortization is not same every year.
Part c
State Rate	$26,851/$244,100	11.00%
Market Rate	$29,264/$195,096	15.00%
Part d
January 1 2014	Cash	$   195,096
	Discount on Bond Payable	$      49,004
	Bond Payable		$   244,100
	(To record issuance of bond)
Part e
Dec 31 2014	Interest Expense	$      29,264
	Discount on Bond Payable		$        2,413
	Interest Payable		$      26,851
	(To record interest Expense)
Part f
Dec 31 2021	Interest Expense	$      33,270
	Discount on Bond Payable		$        6,419
	Interest Payable		$      26,851
	(To record interest Expense)