Journal entries:
No. | Date | Account title and explanation | Debit | Credit |
1 | June 30,2017 | Cash | $3,978,349 | |
Bonds payable | $3,700,000 | |||
Premium on bonds payable | $278,349 | |||
[To record issuance of bonds] | ||||
2 | Dec 31,2017 | Interest expense | $238,701 | |
Premium on bonds payable | $1,799 | |||
Cash | $240,500 | |||
[To record interest payment and amortization of premium] | ||||
3 | June 30,2018 | Interest expense | $238,593 | |
Premium on bonds payable | $1,907 | |||
Cash | $240,500 | |||
[To record interest payment and amortization of premium] | ||||
4 | Dec 31,2017 | Interest expense | $238,479 | |
Premium on bonds payable | $2,021 | |||
Cash | $240,500 | |||
[To record interest payment and amortization of premium] |
Calculations:
Date | Cash paid | Interest expense | Premium amortization | Carrying value |
June 30,2017 | $3,978,349 | |||
Dec 31,2017 | $240,500 | $238,701 | $1,799 | $3,976,550 |
June 30,2018 | $240,500 | $238,593 | $1,907 | $3,974,643 |
Dec 31,2018 | $240,500 | $238,479 | $2,021 | $3,972,622 |
Cash paid = Face value x 13% x 6/12 = $3,700,000 x 13% x 6/12 = $240,500
Interest expense = Preceding carrying value x 12% x 6/12
Premium amortization = Cash paid - Interest expense
Carrying amount = Preceding carrying value - Premium amortized
Balance Sheet:
Pina Company | |
Balance Sheet(partial) | |
For the year ended December 31,2018 | |
Liabilities: | |
Bonds payable | $3,700,000 |
Add: Premium on bonds payable | $272,622 |
Total | $3,972,622 |
Additional Requirements:
1. Interest expense reported for 2018:
Interest expense, June 30,2018 | $238,593 |
Interest expense, Dec 31,2018 | $238,479 |
Total interest expense for 2018 | $477,072 |
2.The bond interest expense reported in 2018 will be greater than the amount that would be reported if the straight-line method of amortization were used.
Total Cash paid in 2018 (240,500+240,500) | $481,000 |
Less: Premium amortized-straight line (278,349/20 years) | $13,917 |
Interest expense | $467,083 |
Interest expense of $477,072 under effective interest greater than the interest expense of $467,083 under straight-line
3.
Total cash paid (481,000 x 20 years) | $9,620,000 |
Less: Total cash received | $3,978,349 |
Total Cost of borrowing | $5,641,651 |
On June 30, 2017, Pina Company issued $3,700,000 face value of 13%, 20-year bonds at $3,978,349,...
On June 30, 2017. Flint Company issued $5.100.000 Face value of 13% 20-year bonds at $5483,670, a yield of and December 31 Fines the effective-interest method to amortize bond premium or discount The bonds paysann feest on line 30 werden 3 4 by r Prepare the journal entries to record the following transactions. Round when amount is entered. Do not inden man ett y for the account indender for the amounts Credit counter automaty Indented (1) The issuance of the...
Exercise 14-9 On June 30, 2017, Vaughn Company issued $4,500,000 face value of 13%, 20-year bonds at $4,838,533, a yield of 12%. Vaughn uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit...
On June 30, 2017, Nash Company issued $3,300,000 face value of 13% 20 year bonds at $3,548,237. a yield of 12%. Nash uses the effective interest method to amortize bond premium or discount. The bonds por serial interest on ne 30 and December 31 select "No Entry for the accounts and enter for the amount Credit c a r indented Prepare the journal entries to record the following transactions. Round answer to decimal places a 3548. Innbys when amount is...
On June 30, 2020, Mischa Auer Company issued $4,000,000 face value of 13%, 20-year bonds at $4,300,918, a yield of 12%. Auer uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. I just need help with #3 in the last part Prepare the journal entries to record the following transactions. (Round answer to o decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the...
On June 30, 2020, Pronghorn Company issued $3,400,000 face value of 13%, 20-year bonds at $3,655,780, a yield of 12%. Pronghorn uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles...
On June 30, Year 7, Princess Company issued $4,000,000 face value of 13%, 20-year bonds at $4,300,920, a yield of 12%. Princess uses the effective-interest method to amortize bond premiums and discounts. The bonds pay interest semiannually on June 30 and December 31. Instructions: Round all answers to the nearest dollar! A. Prepare the journal entries to record the following transactions: The issuance of the bonds on June 30, Year 7 The payment of interest and the amortization of the...
On June 30, 2017, Bramble Company issued $5,300,000 face value of 13%, 20-year bonds at $5,698,716, a yield of 12%. Bramble uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31 Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles...
On June 30, 2020, Carla Company issued $5,640,000 face value of 14%, 20-year bonds at $6,488,600, a yield of 12%. Carla uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles...
On June 30, 2020, Shamrock Company issued $4,470,000 face value of 14%, 20-year bonds at $5,142,560, a yield of 12%. Shamrock uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles...
On June 30, 2020, Kingbird Company issued $3,120,000 face value of 15%, 20-year bonds at $3,824,160, a yield of 12%. Kingbird uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Provide the answers to the following questions. (1) What amount of interest expense is reported for 2021? (Round answer to 0 decimal places) (2) Will the bond interest expense reported in 2021 be the same as, greater than,...