Exercise 14-9 (Part Level Submission) On June 30, 2017, Headland Company issued
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Question
Exercise 14-9 (Part Level Submission)
On June 30, 2017, Headland Company issued $3,300,000 face value of 13%, 20-year bonds at $3,548,257, a yield of 12%. Headland uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
(a)
No.
Date
Account Titles and Explanation
Debit
Credit
June 30, 2017
December 31, 2017
June 30, 2018
December 31, 2018
Exercise 14-9 (Part Level Submission)
On June 30, 2017, Headland Company issued $3,300,000 face value of 13%, 20-year bonds at $3,548,257, a yield of 12%. Headland uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Explanation / Answer
Amort Chart Date Cash Interest Premium Unamortized BV at the end Interest Expense Amortized Premiumt 30.06.17 248,257 3548257 31.12.17 214500 212895 1605 246,652 3546652 30.06.18 214500 212799 1701 244,951 3544951 31.12.18 214500 212697 1803 243,148 3543148 Journal entries: Date Accounts title and explanations Debit $ Credit $ 30.06.17 Cash account Dr. 3548257 Bonds payable Account 3300000 Premium on bonds payable Account 248257 31.12.17 Interest expense Account Dr. 212895 Premium on Bonds payable Account Dr. 1605 Cash account 214500 30.06.18 Interest expense Account Dr. 212799 Premium on Bonds payable Account Dr. 1701 Cash account 214500 31.12.18 Interest expense Account Dr. 212697 Premium on Bonds payable Account Dr. 1803 Cash account 214500
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