Duval Co. issues four-year bonds with a $119,000 par value on June 1, 2015, at a
ID: 2423484 • Letter: D
Question
Duval Co. issues four-year bonds with a $119,000 par value on June 1, 2015, at a price of $114,840. The annual contract rate is 5%, and interest is paid semiannually on November 30 and May 31. Prepare an amortization table for these bonds. Use the straight-line method of interest amortization. Prepare journal entries to record the first interest payment, accrued interest as of December 31, 2015 and to record the second interest payment. Assume no reversing entries have been prepared.Record the first interest payment on November 30, 2015. Record the year-end accrual of interest.Record the second interest payment on December 31, 2016.
Explanation / Answer
Date Interest expense Amortisation of discount Debit balance in the bond discount account Credit balance in bonds payable Book value 1-Jun-15 $ 4,160 $ 119,000 $ 114,840 30-Nov-15 $ 2,871 $ 520 $ 3,640 $ 119,000 $ 115,360 31-May-16 $ 2,884 $ 520 $ 3,120 $ 119,000 $ 115,880 30-Nov-16 $ 2,897 $ 520 $ 2,600 $ 119,000 $ 116,400 31-May-17 $ 2,910 $ 520 $ 2,080 $ 119,000 $ 116,920 30-Nov-17 $ 2,923 $ 520 $ 1,560 $ 119,000 $ 117,440 31-May-18 $ 2,936 $ 520 $ 1,040 $ 119,000 $ 117,960 30-Nov-18 $ 2,949 $ 520 $ 520 $ 119,000 $ 118,480 31-May-19 $ 2,962 $ 520 $ - $ 119,000 $ 119,000 30-Nov-15 Interest expense Debit $ 2,871 To discount of bonds Credit $ 520 To Cash Credit $ 3,391 Accured interest 31 Dec 2015 $ 480.67 $ 86.67 $ 567 31-May-16 Interest expense Debit $ 2,884 To discount of bonds Credit $ 520 To Cash Credit $ 3,404 30-Nov-16 Interest expense Debit $ 2,897 To discount of bonds Credit $ 520 To Cash Credit $ 3,417
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