Question

Hello, I am having trouble computing the amounts for the journal entries that are red. I am using a financial calculator, so I would prefer step by step instructions on how to get the correct answer using a calculator. Thank you!​​​​​​​

On January 1, 2020, Sheridan Corporation issued $560,000 of 7% bonds, due in 10 years. The bonds were issued for $601,659, and pay interest each July 1 and January 1. The effective-interest rate is 6%. 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. Sheridan uses the effective-interest method. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit No. (a) Date Jan. 1, 2020 Account Titles and Explanation | Cash 601659 Premium on Bonds Payable 41659 Bonds Payable 560000 July 1, 2020 Interest Expense 18050 Premium on Bonds Payable 1550 Cash 19600 (c) Dec. 31, 2020 V Interest Expense 18096 Premium on Bonds Payable 1504 Interest Payable 19600

Answer 1

Answer -

Journal of Sheridan Corporation

No.	Date	Account Title and Explanation	Debit ($)	Credit ($)
(a)	Jan. 1, 2020	Cash Premium on Bonds Payable [Difference] Bonds Payable	601659 - -	- 41659 560000
(b)	July 1, 2020	Interest Expense [Refer working note - (1)] Premium on Bonds Payable [Difference] Cash [($560000 * 7%) * 6/12]	18050 1550 -	- - 19600
(c)	Dec. 31, 2020	Interest Expense [Refer working note - (1)] Premium on Bonds Payable [Difference] Interest Payable [($560000 * 7%) * 6/12]	18003 1597 -	- - 19600

# Working note - (1) - Calculation of Interest Expense -

Date	Interest payment ($)	Interest Expense ($)	Amortization of bond premium ($)	Credit balance in bond premium account ($)	Credit balance in bonds payable account ($)	Book value of the the bonds ($)
(A)	(B)	(C) = (G) * 3%	(D) = (C) - (B)	(E)	(F)	(G) = (F) + (E)
Jan. 1, 2020	19600 [560000 * 3.5%]	-	-	41659	560000 [Given in question]	601659 [560000 + 41659]
July 1, 2020	19600 [560000 * 3.5%]	18050 [601659 * 3%]	(1550) [18050 - 19600]	40109 [41659 - 1550]	560000 [Given in question]	600109 [560000 + 40109]
Dec. 31, 2020	19600 [560000 * 3.5%]	18003​​​​​​​ [600109 * 3%]	(1597) [18003 - 19600]	38512 [40109 - 1597]	560000 [Given in question]	598512 [560000 + 38512]