Pennington Corporation issued 5-year, 8.6% bonds with a total face value of $700,000 on January 1, 2021, for $680,000. The bonds pay interest on June 30 and December 31 of each year. Required: 1. Prepare an amortization table. 2. Prepare the entries to recognize the bond issuance and the interest payments made on June 30, 2021, and December 31, 2021.
Calculation:
Amortization of bonds =20,000/10 | ||||||||
2000 | ||||||||
Interest paid = 700,000*8.6%*1/2 | ||||||||
30100 | ||||||||
1) | Amortization schedule | |||||||
date | interest | interest | Discount | Carrying | ||||
paid | expense | amortized | value | |||||
1/1/2021 | 680,000 | |||||||
6/30/2021 | 30100 | 32100 | 2000 | 682,000 | ||||
12/31/2021 | 30100 | 32100 | 2000 | 684,000 | ||||
6/30/2022 | 30100 | 32100 | 2000 | 686,000 | ||||
12/31/2022 | 30100 | 32100 | 2000 | 688,000 | ||||
6/30/2023 | 30100 | 32100 | 2000 | 690,000 | ||||
12/31/2023 | 30100 | 32100 | 2000 | 692,000 | ||||
6/30/2024 | 30100 | 32100 | 2000 | 694,000 | ||||
12/31/2024 | 30100 | 32100 | 2000 | 696,000 | ||||
6/30/2025 | 30100 | 32100 | 2000 | 698,000 | ||||
12/31/2025 | 30100 | 32100 | 2000 | 700,000 | ||||
2) | Journal Entries | |||||||
Date | General Journal | debit | Credit | |||||
1/1/2021 | cash | 680,000 | ||||||
discount on bonds payable | 20,000 | |||||||
bonds payable | 700,000 | |||||||
6/30/2021 | interest expense | 32100 | ||||||
discount on bonds payable | 2000 | |||||||
cash | 30100 | |||||||
12/31/2021 | ||||||||
interest expense | 32100 | |||||||
discount on bonds payable | 2000 | |||||||
cash | 30100 |
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