Question

11:25 AM Mon Feb 3 Х C15 #2 Weygandt, Accounting Principles, 13e Help System Announcements CALCULATOR PRINTER VERSION BACK Problem 15-08A a-e On January 1, 2020, Wildhorse Corporation issued $2,170,000 face value, 4%, 10-year bonds at 12.002.438. This price resulted in an effective-interest rate of 5% on the bonds. Lock uses the effective interest method to amortize bond premium or discount. The bonds pay annual interest on January 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2020 Cash 2170000 Bonds Payable 2002438 Prepare an amortization table through December 31, 2022 (three interest periods) for this bond issue. (Round answers to o decimal places, e.g. 15,250.) LOCK CORPORATION Bond Discount Amortization Effective-Interest Method-Annual Interest Payments Interest to Interest Expense to Be Discount Unamortized Be Paid Recorded Amortization Discount Annual Interest Periods Bond Carrying Value Issue date Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2020. (Round answers to o decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Dec 31, 2020

Answer 1

Answer:

LOCK CORPORATION
Bond Discount Amortization
Effective Interest Method - Annual Interest Payments
Number of payments	Date of Payment	Bond interest paid	Bond Interest Expenses	Discount amortisation	Unamortized Discount	Carrying Value
		($2170000 x 4%)	(Carrying value * 5%)	Interest expense - Interest paid
Issue date	01/01/2020				$167,562	$2,002,438
1	02/01/2021	$86,800	$100,122	$13,322	$154,240	$2,015,760
2	03/01/2022	$86,800	$100,788	$13,988	$140,252	$2,029,748
3	04/01/2023	$86,800	$101,487	$14,687	$125,565	$2,044,435
	Journal Entries
	Date	Account Title & Explanation	Debit ($)	Credit ($)
	01-Jan-20	Cash	$2,002,438
		Discount on issue of bond	$167,562
		Bonds payable		$2,170,000
		(Issue of bonds)
	31-Dec-20	Interest expense	$100,122
		Discount on issue of bond		$13,322
		Interest payable		$86,800
		(Interest accrual and amortization of discount)
	01-Jan-21	Interest payable	$86,800
		Cash		$86,800
		(Payment of interest)
	31-Dec-21	Interest expense	$100,788
		Discount on issue of bond		$13,988
		Interest payable		$86,800
		(Interest accrual and amortization of discount)

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