Question

In the following two independent cases, the company closes its books on December 31:

1.		Marin Inc. sells $2.17 million of 8% bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The bonds’ due date is September 1, 2023. The bonds yield 10%.
2.		Sweet Acacia Ltd. sells $5.30 million of 9% bonds on June 1, 2020. The bonds pay interest on December 1 and June 1. The bonds’ due date is June 1, 2024. The bonds yield 8%. On October 1, 2021, Sweet Acacia buys back $1.06 million worth of bonds for $1.85 million, including accrued interest.

Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.

Prepare all of the relevant journal entries from the time of sale until the date indicated. For situation 1, prepare the journal entries through December 31, 2021. Assume that no reversing entries were made. Use the amounts arrived at from using (1) factor tables, (2) a financial calculator, or (3) Excel function PV from the time of sale until the date indicated. Use the effective interest method for discount and premium amortization. (Hint: Refer to Chapter 3 for tips on calculating.) (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
3/1/209/1/2012/31/203/1/219/1/2112/31/21
3/1/209/1/2012/31/203/1/219/1/2112/31/21
3/1/209/1/2012/31/203/1/219/1/2112/31/21
3/1/21
3/1/209/1/2012/31/203/1/219/1/2112/31/21
3/1/209/1/2012/31/203/1/219/1/2112/31/21

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List of Accounts

  

  

For situation 1, prepare any necessary original amortization tables. (Hint: Refer to Chapter 3 for tips on calculating.) (Round answers to 0 decimal places, e.g. 5,275.)

Schedule of Bond Discount Amortization Effective Interest Method

Date

Cash Paid

Interest Expense

Discount Amortized

Carrying Amount of Bonds

3/1/20

$

9/1/20

$

$

$

3/1/21

9/1/21

3/1/22

9/1/22

3/1/23

9/1/23

Answer 1

Sibuanbul Cash Paid 1/9/20 $ 86,800 4321 86,800 11911 86,800 4/3/22 86,800 179/12 86,800 1/8/23 86,800 Sendule of Bond Discount Amortization Effective Interest method "8% Bonds Sold to Yold 10% Inlernt Eup Amorhohing Bond Carrying Bond Decount Discount Value Bora | 18,530,5$ 204469.84 p. 102, 223.492.pl 15423.492 110,106.668 9059893.3 102,994, 667 16194.667 93,912.00) 89076,088 103, 8o4.4 17004.4 76,907.601 2093,0924 104, 654.62 17854.62 59,052.981 2110947.02 105,547.351 18747.351 40305-63 2189694-37 106,484.719 19,684.719 26,620.91 2149379.09 $ 107,468.954 40668.954 $ 48,043 $ 2170.000 / &,800 09123 ) Calculation - Cash Paid ($ 279000 x870)/2=86200 . 5 $ Interwt Eup on bond Interest Eup XPVAL of $1 (7 year, bl. 86,800 X 5.7863 $ 562,250.84 face Valm of bond = face Value x pulf of $1 (7 year, St. $2,179000 X 0.7107 2$ 1,542,219 Cash Proceeds forcon sale of Bend = $2,044,469.84 Bond Discend $ 2,170,000 - 2049469.84 $ 125, 530.16

Journal Entry General Journal Dat 143120 04446984 125.530.16 29,120,000 102,223.492 15,423.422 86,800 119120 31/12/20 13127 Cash Dis. on Borde Payable Bond, Paumbre Interest Eup ( 809049.84x5% Discount on Boods Payable Cash (01704M2 X 1/2) Intesat Exup (102994:667x4/5) Interut Payable Int. Exp. (102999.667X215) Int Payablel 102994.6674/5) Discount of Bonds Payable Cash Int. Expense ( 30760 XS/ Dis. on Bords Payable Cash Lut Expene (10461462) 415 823953 82395:23 411986 82395.73 36793-37 86,800 1038044 17,004,4 861800 93723.69 83723-64 Hola! 3146/21 awoust payable