Question

On January 1, 2020, Kingbird, Inc. issued $2,680,000 face value, 12%, 10-year bonds at $2,534,577. This price resulted in an effective-interest rate of 13% on the bonds. Kingbird uses the effective interest method to amortize bond premium or discount. The bonds pay annual interest on January 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Jan. 1, 2020 SHOW LIST OF ACCOUNTS Prepare an amortization table through December 31, 2022 (three interest periods) for this bond issue. (Round answers to 0 decimal places, e.g. 15,250.) Kingbird, Inc. Bond Discount Amortization Effective-Interest Method-Annual Interest Payments Annual Interest Periods Interest to Be Paid Se Discount Amortization Unamortized Discount Bond Carrying Value to Be Recorded Issue date $ ta SHOW LIST OF ACCOUNTS Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2020. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Dec. 31, 2020

Answer 1

Table values are based on:
n=	10
i=	13.0%
Cash Flow	Amount	Present Value
Interest	$2,680,000*12.0% =$321,600	$17,45,079	PVAF(i,n)	PVIF(i,n)
Principal	$2,680,000	$7,89,501	5.42624	0.29459
Price of Bonds		$25,34,580
Amortization table
Date	Interest Payment($2,680,000*12.0%)	Interest expenses(Bond carrying amount*13%)	Discount amorrtization	Unamortized discount	Bond carrying amount
Issue date				1,45,420	25,34,580
31-Dec-20	3,21,600	3,29,495	7,895	1,37,525	25,42,475
31-Dec-21	3,21,600	3,30,522	8,922	1,28,603	25,51,397
31-Dec-22	3,21,600	3,31,682	10,082	1,18,521	25,61,479
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Issue date	Cash	25,34,580
		Discount on Bonds payable	1,45,420
		Bonds Payable		26,80,000
	31-Dec-20	Interest Expenses	3,29,495
		Discounts on Bond payable		7,895
		Interest payable		3,21,600
		(Discount on Bonds amortized)
	01-Jan-21	Interest Payable	3,21,600
		Cash		3,21,600
	31-Dec-21	Interest Expenses	3,30,522
		Discounts on Bond payable		8,922
		Interest payable		3,21,600
		(Discount on Bonds amortized)