Question

40 Chapter 14 Financing Liabilities: Bonds and Long-Term Notes Payable repare any adjusting entries for the end of the fiscal year, December 31, 2019, using the straight-line method of amortization S chective interest method of amortization me the company retires the bonds on June 30, 2020, at 103 plus accrued interest tries to record the bond retirement using the: straight-line method of amortization b. effective interest method of amortization P14-6 Discount Amortization Schedule and Retirement Before maturity, Foster Incorporated sold $50 10 145 bonds on Tanuary 1, 2019. for $470,143.47, a price that yields a 14% interest rate. The bonds nav in LO 14.6 mually on June 30 and December 31 and are due December 31, 2022. Foster uses the effective inte Required: 1. Prepare an interest expense and discount amortization schedule. 2. Assume the company reacquired the bonds on July 1, 2021, at 104. Prepare journal entrie bond retirement P14-7 Comprehensive Wilbury Corporation issued $1 million of 13.5% bonds for $985,071.68. The LO 14.5 and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually or LO 14.6 September 30. Assume an effective yield rate of 14%. LO 14.9 Required: SHOW ME HOW 1. Prepare a bond interest expense and discount amortization schedule using the straight-line in 2. Prepare a bond interest expense and discount amortization schedule using the effective inter 3. Prepare adjusting entries for the end of the fiscal year December 21 20 a stricht

problem 14-6. Before maturity, Foster incorporated sold $500,000 of 12% bonds on january 1, 2019, for $470,143.47 a price that yields a 14% interest rate. the bonds pay interest semiannually on June 30 and december 31 and are due December 31, 2022. foster uses the effective interest method.

prepare an interest expense and discount ammortization schedule.
assume the company reacquired the bonds on July 1, 2021 at 104. prepare journal entries to record the bond retirement.

Answer 1

In the Present question :-
Principal	500000
Coupon rate	6.00%	(12/2)
Period	8
Yeild Rate	7.00%	(14/2)
Yearly Interest	$30,000.00	(500000*6%)
Payment and Discounting Chart is as follows:-
1	0.9346	$30,000.00	$28,037.38
2	0.8734	$30,000.00	$26,203.16
3	0.8163	$30,000.00	$24,488.94
4	0.7629	$30,000.00	$22,886.86
5	0.7130	$30,000.00	$21,389.59
6	0.6663	$30,000.00	$19,990.27
7	0.6227	$30,000.00	$18,682.49
8	0.5820	$530,000.00	$308,464.83
		TOTAL	$470,143.51
1.)
Bond Ammortization Schedule would be
A	B	C	D	E	F	G
	Interest	Interest	Ammortizing	Debit bal.	Credit Bal.	Book Value
	Payment	Expense	Bond Discount	in the account	in the account	of Bonds
	6% * Face	Mkt 7 % * G	C minus B	Bond Discount	Bonds Payable	F Minus E
01/01/2019				$29,856.49	$500,000.00	$470,143.51
30/06/2019	$30,000.00	$32,910.05	$2,910.05	$26,946.45	$500,000.00	$473,053.55
31/12/2019	$30,000.00	$33,113.75	$3,113.75	$23,832.70	$500,000.00	$476,167.30
30/06/2020	$30,000.00	$33,331.71	$3,331.71	$20,500.99	$500,000.00	$479,499.01
31/12/2020	$30,000.00	$33,564.93	$3,564.93	$16,936.06	$500,000.00	$483,063.94
30/06/2021	$30,000.00	$33,814.48	$3,814.48	$13,121.58	$500,000.00	$486,878.42
31/12/2021	$30,000.00	$34,081.49	$4,081.49	$9,040.09	$500,000.00	$490,959.91
30/06/2022	$30,000.00	$34,367.19	$4,367.19	$4,672.90	$500,000.00	$495,327.10
31/12/2022	$30,000.00	$34,672.90	$4,672.90	$0.00	$500,000.00	$500,000.00
2.)
Journal entries to record the Bond's retirement
Date	Description			Amount(Dr.)	Amount(Cr.)
1st July	Bonds Payable			$500,000.00
2021	Loss on Bond Retirement			$33,121.58
	Cash/Bank				$520,000.00
	Discount on Bond Issue				$13,121.58
	(Bonds Paid on 31st July,2021)

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