Question

Ivanhoe Co. sells $537,000 of 8% bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. Give entries through December 31, 2021.

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.)

(a) Ivanhoe Co. sells $537,000 of 8% bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. Give entries through December 31, 2021. 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 Interest Expense Discount Amortized Carrying Amount of Bonds Date 3/1/20 $ $1 $ $ 9/1/20 20000 3/1/21 20000 9/1/21 20000 3/1/22 20000 9/1/22 20000 3/1/23 20000 9/1/23 20000 537000

Answer 1

Journal Entries Date General Journal 1/3/2020 Cash Discount on bonds payable Bonds Payable $ $ Debit Credit 477,045 59,955 $ 537,000 Bonds Amortization Schedule Date Cash Interest Paid Bond Interest Expense Discount Amortized Carrying Amount 1/3/2020 $ 477,045 1/9/2020 $ 21,480 $ 28,623 $ 7,143 $ 484,188 1/3/2021 $ 21,480 $ 29,051 $ 7,571 $ 491,759 1/9/2021 $ 21,480 $ 29,506 $ 8,026 499,785 1/3/2022 $ 21,480 $ 29,987 $ 8,507 508,292 1/9/2022 $ 21,480 $ 30,498 $ 9,018 $ 517,309 1/3/2023 $ 21,480 $ 31,039 $ 9,559 $ 526,868 1/9/2023 $ 21,480 $ 31,612 $ 10,132 $ 537,000 $ 28,623 1/9/2020 Interest Expense Discount on bonds payable Cash $ 7,143 $ 21, 480 $ 19,082 31/12/2020 Interest Expense Discount on bonds payable Interest Payable $ 4,762 $ 14,320 $ $ Working Note: Calculate the Issue price of Bonds : Present value of interest payments (537000*8%*6/12)*5.58238 Present value of principal (537000*0.66506) 1/3/2021 Interest Expense Interest Payable Discount on bonds payable Cash 9,541 14,320 $ 119,910 $ 2,381 $ 21, 480 $ $ 357,136 477,045 $ 29,506 1/9/2021 Interest Expense Discount on bonds payable Cash $ 8,026 $ 21, 480 $ 19,671 31/12/2021 Interest Expense Discount on bonds payable Interest Payable $ 5,351 $ 14,320 Note : Please comment down for any further clarifications.