Question

On January 1, 2020, Buffalo Company sold 11% bonds having a maturity value of $600,000 for $622,744, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Buffalo Company allocates interest and unamortized discount or premium on the effective-interest basis.

Prepare the journal entry at the date of the bond issuance. (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 are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2020 SHOW LIST OF ACCOUNTS LINK TO TEXT

Prepare a schedule of interest expense and bond amortization for 2020–2022. (Round answer to 0 decimal places, e.g. 38,548.) Schedule of Interest Expense and Bond Premium Amortization Effective-Interest Method Date Cash Paid Interest Expense Premium Amortized Carrying Amount of Bonds 1/1/20 $ $ $ $ 12/31/20 12/31/21 12/31/22 SHOW LIST OF ACCOUNTS LINK TO TEXT

Prepare the journal entry to record the interest payment and the amortization for 2020. (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 are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2020 SHOW LIST OF ACCOUNTS LINK TO TEXT

Prepare the journal entry to record the interest payment and the amortization for 2022. (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 are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2022

Answer 1

Solution:

Requirement 1:

Date	Account Titles and Explanation	Debit	Credit
January 1,2020	Cash	$       622,744
	Premium on Bonds Payable		$               22,744
	Bonds Payable		$             600,000
	(To record bond issued at premium )

Requirement 2:

Schedule of Interest Expense and Bond Premium Amortization
Effective-Interest Method
Date	Cash Paid	Interest Expense	Premium Amortized	Carrying Amount of Bonds
1/1/2020				$                                   622,744
12/31/2020	$         66,000	$                  62,274	$                            3,726	$                                   619,018
12/31/2021	$         66,000	$                  61,902	$                            4,098	$                                   614,920
12/31/2022	$         66,000	$                  61,492	$                            4,508	$                                   610,412

Requirement 3:

Date	Account Titles and Explanation	Debit	Credit
December 31,2020	Interest Expense	$         62,274
	Premium on Bonds Payable	$            3,726
	Cash		$               66,000
	( To record interest expense paid)

Requirement 4:

Date	Account Titles and Explanation	Debit	Credit
December 31,2022	Interest Expense	$         61,492
	Premium on Bonds Payable	$            4,508
	Cash		$               66,000
	( To record interest expense paid)