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Problem 14-5 In each of the following independent cases, the company closes its books on December 31. Your answer is partially correct. Try again Pronghorn Co. sells $537,000 of 8% bonds on March 1, 2017, The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2020, The bonds yield 12% Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Round answers to O decimal places, e.g. 38,548.) Schedule of Bond Discount Amortization Effective-Interest Method Bonds Sold to Yield Cash Paid Amount of Date ExpenseDiscountCarrying zedBonds 472090 25000 28325 3325 475415 25000 28525 3525 478940 25000 28736 3736 482676 25000 28961 3961 486637 25000 29198 4198 490835 3/1/20 25000 29450 4450 496285 9/1/20 25000 29715 4715 500000
Prepare all of the relevant journal entries from the time of sale until the date indicated. (Assume that no reversing entries were made.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971. 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 Credit 3/1/17 Cash iscount on Bonds Payable 2791 Bonds Payable Interest Expense Discount on Bonds Payable 3325 Cash 25000 terest Expense 19017 Discount on Bonds Payable 2350 Interest Payable 16667 Interest Expense 9508 Interest Payable 16667 Discount on Bonds Payable 1175 Cash 25000 Interest Expense 28736 Discount on Bonds Payable 3736 Cash 25000 Interest Expense 19308 Discount on Bonds Payable 2641 Interest Payable 16667
Your answer is partially correct. Try again. Stellar Co. sells $365,000 of 12% bonds on June 1, 2017. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1 2021. The bonds yield 8%. On October 1, 2018, Stellar buys back $116,800 worth of bonds for $123,800 (includes accrued interest). Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Round answers to 0 decimal places e.g. 38,548.) Schedule of Bond Discount Amortization Effective-Interest Method Bonds Sold to Yield Cash Paid penseDiscount Carrying Amortized Amount Bonds Date 425853 24000 21293 2707 423146 24000 21157 2843 420303 12/1/18 24000 21015 2985 417318 24000 20866 3134 414184 12/1/19 24000 20709 3291 410893 6/1/20 24000 20545 3455 407438 12/1/20 24000 20372 3628 403810 6/1/21 24000 20190 3810 400000 Difference due to rounding
Prepare all of the relevant journal entries from the time of sale until the date indicated. Give entries through December 1, 2019. (Assume that no reversing entries were made.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g.58,971. 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.) Dale eceent Tiles and Explenation 2/31/17Interest Expense on Bonds Payable Interest Payable 1/18 nterest Expense on Bonds Payable 10/1/18 nterest Expense on Bonds Payable (To record interest expense and premium amortization) 10/3/18 on Bonds Payable To record buy back of bonds) 12/1/18 on Bonds Payable
12/31/17Interest Expense on Bonds Paryable Interest Payable V1/18 11/18 Interest Expense on Bonds Payable To recerd interest expense and premium amortization) on Bonds Payable Gain on To record buy back of bonds) 12/1/18 2/31/18 Interest Expense on Bonds Payable Premium on Bonds Payable on Bonds Payable
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Answer #1

Bond Discount or Premium Amortization

Pronghorn Co Schedule of Bond Discount Amortization Calculation Date Cash Paid Interest expense Discount Amortized Bond CarryDate Account Titles and Explanati Debit Credit Calculation 1-Mar-17 Cash 477,045 59,955 Discount on Bonds Payable Bonds Payable 537,000 1-Sep-17 Interest expense 28,623 Discount on Bonds Payable Cash 7,143 21,480 -29051/6*4 Accrued for 4 months Accrued for 4 months Accrued for 4 months 31-Dec-17 Interest expense 19,367 Discount on Bonds Payable Interest Payable 5,047 7571/6*4 14,320 21480/6*4 9,684 14,320 -29051/6*2 from above ent 1-Mar-18 Interest expense Remaining 2 months Interest Payable Discount on Bonds Payable Cash 2,524 7571/6*2 21,480 Remaining 2 months 1-Sep-18 Interest expense 29,506 Discount on Bonds Payable Cash 8,026 21,480 Accrued for 4 months Accrued for 4 months Accrued for 4 months 31-Dec-18 Interest expense 19,991 29987/6*4 Discount on Bonds Payable Interest Payable 5,671-8507/6*4 14,320 21480/6*4Stellar Co Schedule of Bond discount Amortization Effective-Interest Method Bonds Sold to Yield Date Cash paid Calculation Interest expense Interest expense Discount amortized Carrying Amount of bonds 12% 8% 1-Jun-17 1-Dec-17 1-Jun-18 1-Dec-18 1-Jun-19 1-Dec-19 1-Jun-20 1-Dec-20 1-Jun-21 21,900 21,900 21,900 21,900 21,900 21,900 21,900 16,566 16,353 16,131 15,900 15,660 5,547 5,769 6,000 6,240 6,490 414,149 414149*8% 6/12 408,815-408815*8%*6/12 403,268 397,498 391,498 385,258 378,768 372,019 365,000 15,151 14,881 7,019 49,149 Formula 365,000 * 12% * 6/12 carrying amt 8%6/12 Cash paid less interest expense Carrying amount of bonds less Premium amortized Present Value (PV PV of Interest PV of Maturity amount $ Total PV Future Value Bond Premium Calculation 147,447-11-21900(1-(1/(1+4%)ng))/4% 266,701.92-365000/(1+4%)ng 414,149.04 Carrying Amount of bonds on 1st June 2017 (365,000.00) Amount to be received at maturity of bond 49,149.04 Premiunm Bond 49,149 15,728 365,000 116,800 1-Oct-18 Buyback of bonds Date Cash paid Calculation Interest expense Discount amortized Carrying Amount of bonds Interest expense 12% 8% 1-Dec-17 1-Jun-18 1-Oct-18 7,008 7,008 4,672 5,301 5,233 3,441 132,528 130,821 129,046 127,815 132528*8%*6/12 130821*896*6/12 129046*896*4/12 1,707 1,231 4,713 Present Value PV of Interest PV of Maturity amount Total PV Future Value Bond Premium Bond premium amortized 47,183-7008(1-(1/(1+496)ng))/4% 85,345 #116800/(1+496)ng 132,528 116,800 15,728 1-Oct-18 Bond Premium balance 11,015Date Account Titles and Explanation Debit Credit Calculation 1-Jun-17 Cash 414,149 Premium on Bonds Payable Bonds Payable 49,149 365,000 16,566 5,334 1-Dec-17 Interest expense Premium on Bonds Payable Cash 21,900 16353/6*1 5547/6*1 Accrued for 1 month Accrued for 1 month 31-Dec-17 Interest expense 2,726 925 Premium on Bonds Payable Interest Payable 3,650 13,628 3,650 4,623 16353/6*5 from above ent 5547/6*5 1-Jun-18 Interest expense Accrued for 5 months Interest Payable Premium on Bonds Payable Cash Accrued for 5 months 21,900 -(16131/365000 116800)*4/6 (5769/365000 116800)*4/6 1-Oct-18 Interest expense 3,441 1,231 Premium on Bonds Payable Cash 4,672 To record interest expense and amortization) 1-Oct-18 Bonds Payable 116,800 11,015 Premium on Bonds Payable Gain on redemption of bonds Cash (To record buyback of bonds) -15728-4713 8,687 Balancing figure is gain/loss 119,128 -123800-4672 (Interest paid above entry) -16131/365000* (365000-116800) -5769/365000 (365000-116800) 1-Dec-18 Interest expense 10,969 3,923 Premium on Bonds Payable Cash 14,892 -15900/365000* (365000-116800)/6*1 Accrued for 1 month -6000/365000* (365000-116800)/6*1 31-Dec-18 Interest expense 1,802 680 Premium on Bonds Payable Interest Payable Accrued for 1 month 2,482 -15900/365000* (365000-116800)/6*5 From above ent -6000/365000* (365000-116800)/6*5 1-Jun-19 Interest expense Accrued for 5 months Interest Payable Premium on Bonds Payable Cash 9,010 2,482 3,400 Accrued for 5 months 14,892 -15660/365000* (365000-116800) -6240/365000 (365000-116800) 14,892 21900/365000 (365000-116800) 1-Dec-19 Interest expense 10,649 4,243 Premium on Bonds Payable Cash

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