Question

Problem 10-12A On January 1, 2019, Sunland Company issued $3,980,000 face value, 7%, 10-year bonds at $3,712,939. This price resulted in an effective-interest rate of 8% on the bonds. Sunland 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, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2019 SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare an amortization table through December 31, 2021 (three interest periods), for this bond issue. (Round answers to o decimal places, e.g. 15,250.) Sunland Company Bond Discount Amortization Effective-Interest Method-Annual Interest Payments Interest Expense Discount Amortization Unamortized D Annual Interest Periods Interest to Be Paid Interest to be paid to Be Recorded Discount Amortization Unamortized Discount Bond Carrying Value Issue date SHOW LIST OF ACCOUNTS

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Answer 1

Sunland Company
Journal entries
Date	Account Titles	Debit	Credit	Calculation
1-Jan-19	Cash	3,712,939
	Discount on Bonds Payable	267,061		3,980,000-3,712,939
	Bonds Payable		3,980,000
31-Dec-19	Interest expense	297,035
	Discount on Bonds Payable		18,435
	Interest Payable		278,600
1-Jan-20	Interest Payable	278,600
	Cash		278,600
31-Dec-20	Interest expense	298,510
	Discount on Bonds Payable		19,910
	Interest Payable		278,600

Sunland Company
Schedule of Bond discount Amortization
Effective-Interest Method
							Calculation
Date	Cash paid	Interest expense	Discount amortized	Unamortized Discount	Carrying Amt		Interest expense	Discount amortized	Unamortized Disc	Carrying Amt
	7%	8%
Issue date				267,061	3,712,939				3,980,000-3,712,939
1	278,600	297,035	18,435	248,626	3,731,374		3,712,939*8%	297,035-278,600	267,061-18,435	3,980,000-248,626
2	278,600	298,510	19,910	228,716	3,751,284		3,731,374*8%	298,510-278,600	248,626-19,910	3,980,000-228,716
3	278,600	300,103	21,503	207,213	3,772,787		3,751,284*8%	300,103-278,600	228,716-21,503	3,980,000-207,213
4	278,600	301,823	23,223	183,990	3,796,010
5	278,600	303,681	25,081	158,910	3,821,090
6	278,600	305,687	27,087	131,822	3,848,178
7	278,600	307,854	29,254	102,568	3,877,432
8	278,600	310,195	31,595	70,973	3,909,027
9	278,600	312,722	34,122	36,851	3,943,149
10	278,600	315,451	36,851	0	3,980,000
Calculation	3,980,000*7%						Carrying amt*8%	Int exp less cash paid		Face value less Unamortized disc