Homework Answers
Solution 1:
| Bond Amortization Schedule - Methodical Manufacturing | |||||
| Date | Cash Paid | Interest Expense | Premium Amortized | Unamortized premium | Carrying Value |
| 01-Jan-18 | $2,169 | $1,02,169 | |||
| 31-Dec-18 | $6,000 | $5,313 | $687 | $1,482 | $1,01,482 |
| 31-Dec-19 | $6,000 | $5,277 | $723 | $759 | $1,00,759 |
| 31-Dec-20 | $6,000 | $5,241 | $759 | $0 | $1,00,000 |
Solution 2:
| Journal Entries - Methodical Manufacturing | |||
| Date | Particulars | Debit | Credit |
| 01-Jan-18 | Cash A/c Dr | $1,02,169 | |
| To bonds payable | $1,00,000 | ||
| To Preimum on bond payable | $2,169 | ||
| (Being bond issued at premium) | |||
| 31-Dec-18 | Interest Expense Dr | $5,313 | |
| Preimum on bond payable Dr | $687 | ||
| To Cash | $6,000 | ||
| (To record interest payment) | |||
| 31-Dec-19 | Interest Expense Dr | $5,277 | |
| Preimum on bond payable Dr | $723 | ||
| To Cash | $6,000 | ||
| (To record interest payment) | |||
| 31-Dec-20 | Interest Expense Dr | $5,241 | |
| Preimum on bond payable Dr | $759 | ||
| To Cash | $6,000 | ||
| (To record interest payment) | |||
| 31-Dec-20 | Bond Payable Dr | $1,00,000 | |
| To Cash | $1,00,000 | ||
| (To record bond repayment at maturity) | |||
| Journal Entries - Methodical Manufacturing | |||
| Date | Particulars | Debit | Credit |
| 01-Jan-20 | Bond Payable Dr | $1,00,000 | |
| Premium on bond Payable Dr | $759 | ||
| Loss on retirement of bond Dr | $1,241 | ||
| To Cash ($100,000*102%) | $1,02,000 | ||
| (To record early retirement of bonds) | |||
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face value of $1,000, a stated interest rate of 6 percent paid
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On the issue date, the market interest rate was 7 percent, so the
total proceeds from the bond issue were $681,631. Loop uses the
straight-line bond amortization method and adjusts for any rounding
errors when recording interest in the final year.
Required:
1. Prepare...
1
Record the issuance of 520 bonds at face value of $1,000 each
for $506,090.
2
Record the interest payment on December 31, 2018.
3
Record the interest payment on December 31, 2019.
4
Record the interest and face value payment on December 31,
2020.
5
Record the retirement of the bonds at a quoted price of 98,
assuming the bonds are retired on January 1, 2020.
General journal entry options:
No Journal Entry Required
Accounts Payable
Accounts Receivable
Accumulated...
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