Question

Presented below are selected transactions on the books of Sheffield Corporation. May 1, 2020 Bonds payable with a par value of $824,400, which are dated January 1, 2020, are sold at 107 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2030. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2021 Interest on the bonds is paid. April 1 Bonds with par value of $329,760 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized. Prepare journal entries for the transactions above. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer :

Journal Entries Credit Date Accounting Titles Debit May 1, Cash (824400 x 107%) 882,108 Bonds payable Prensium on bonds payable Cash (826400 X 12"/x4/12) Interest expense 824,400 57,708 32.976 32976 98.928 3979.86 397986 Dec 31, Interest expense (824400x124.) 98928 2020 Interest payable Prensium on bonds payable Interest Expense (51708 X 8/116 ** (120 X10) -4 =116 Jani, Interest payable 98928 Cash 2021 98,928

April 1, 2021	Bonds payable	$329,760.00
	Premium on bonds payable (WN.1)	$20894.27
	Interest expense (329,760×12%×3/12)	$9892.80
	Cash ((329760 × 102%) + 9892.80)		$346,248.00
	Gain on redemption of bonds (WN.2)		$14,299.07

Dec 31,2021	Interest expense [(824,400 - 329,760) × 12%]	$59,356.80
	Interest Payable		$59,356.80
	Premium on bonds payable (WN.3)	$4178.85
	Interest expense		$4178.85

WN.1 -

Unammortized Premium = [57,708×(329760/824,400)×105/116] =$20894.27

WN.2 -

Reacquisition price		$346,248
Less: Net carrying value of bonds redeemed
Par value	$329,760
Unammortized premium	20,894.27	(350,654.27)
Less : Accrued interest		(9892.80)
Gain on redemption of bonds		$14,299.07

WN.3 -

Ammortization per year on $494,640 [57,708 * 12/116 * (494,640/824,400)]	$3581.87
Ammortization on $329,760 for 3 months [57,708 * 3/116 * (329760/824,400)]	596.98
Total premium ammortization	$4178.85