Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. problem 14-5a straight-line: amortization of bond

Problem 14-5A Straight-Line: Amortization of bond premium and discount LO P1, P2, P3 [The following information applies to...

Free

70.2K

Verified Solution

Question

Accounting

Problem 14-5A Straight-Line: Amortization of bond premium anddiscount LO P1, P2, P3

[The followinginformation applies to the questions displayedbelow.]

Legacy issues $710,000of 8.0%, four-year bonds dated January 1, 2017, that pay interestsemiannually on June 30 and December 31. They are issued at$621,812 and their market rate is 12% at the issue date.

1. Prepare the January 1, 2017, journal entryto record the bonds' issuance.

2. Determine the total bond interest expense tobe recognized over the bonds' life.

3. Prepare a straight-line amortization tablefor the bonds' first two years.

4. Prepare the journal entries to record thefirst two interest payments

Answer & Explanation Solved by verified expert
4.5 Ratings (863 Votes)

Journal entry for issuance:
Date Accounts title and explanations Debit $ Credit $
01.01.17 Cash account 621812
Discount on Bonds payable 88188
      Bonds Payable 710000
Total Interest:
8 payments of 28,400 each 227200
Maturity amount to be paid 710000
Total repayment 937200
Less: Amount borrowed 621812
Total Interest: 315388
Total Discount on Bonds payable: 88188
Divide: Number of periods 8
Discount amortized each period 11023.5
Amort Chart:
Period Cash Interest Discount Unamortized Carrying
Amortized Discount value
01.01.17 88188 621812
30.06.17 28400 11023.5 77164.5 632835.5
31.12.17 28400 11023.5 66141 643859
30.06.18 28400 11023.5 55117.5 654882.5
31.12.18 28400 11023.5 44094 665906
Journal entries
Date Accounts title and explanations Debit $ Credit $
30.06.17 Interest expenses 39423.5
     Cash account 28400
     Discount on Bonds payable 11023.5
31.12.17 Interest expenses 39423.5
     Cash account 28400
     Discount on Bonds payable 11023.5

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Psychology
1.2K views

What are Kierkegaard's three stages of existence? Explain

Psychology
1.2K views

1) Based on your knowledge of development, how would you explain the death of a grandparent...

Biology
1.2K views

As Scooby-Doo continually sniff the Scooby Snax, Scooby-Doo experiences sensory adaptation andhas a harder time...

Biology
1.2K views

A "belt" of proteins pinches a cleavage furrow into a cell, the process is called....

Biology
1.2K views

Identify the structures in the images using the Mold Structures drawings provided Choose the correct...

Geometry
1.2K views

Make a table of values using multiples of 4 for x If an answer is...

Basic Math
1.2K views

Determine whether the function f(x) = |x|+x +0.001 is even, odd or neither.oddevenneither

Basic Math
1.2K views

Perform the following conversion using either the proportion method or dimensional analysis.180 mL = ...

Algebra
1.2K views

1 Evaluate the following expression x 8 n where n is a whole number 3...

Accounting
1.2K views

Problem1 (2 Points) The following information relates to the Broadway Suites on December 31, 20X8:...

Accounting
1.2K views

Obtain the latest audited annual financial statements for the company identified. Generally, that will mean...

Accounting
1.2K views

Direction: Analyze the following questions and present your insights. Question: The case involved the...