\"P14-5 (Comprehensive Bond Problem) (Note: Calculations with financial calculat
ID: 2459297 • Letter: #
Question
"P14-5 (Comprehensive Bond Problem) (Note: Calculations with financial calculators or tables might result in slightly different values due to rounding.)" "Instructions: (Round to the nearest dollar.) In each of the following independent cases the company closes its books on December 31. For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.)" 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2014. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2017. The bonds yield 12% Give the entries through December 31, 2015.
Explanation / Answer
Present value of the bonds = 25,000 x PVAi=6%, n= 7 + 500,000 x PVi=6%, n=7 = 25,000 x 5.582 + 500,000 x 0.665
= 139,550 + 332,500 = $ 472,050
Date Account Titles Debit Credit $ $ March 1, 2014 Cash 472,050 Discount on bonds payable 27,950 Bonds payable 500,000 September 1, 2014 Interest expense 28,323 Discount on bonds payable 3,323 Cash 25,000 December 31, 2014 Interest expense 19,015 Discount on bonds payable 2,348 Interest payable 16,667 March 1 2015 Interest expense 9,554 Interest payable 16,667 Discount on bonds payable 1,221 Cash 25,000 September 1 2015 Interest expense 28,737 Discount on bonds payable 3,737 Cash 25,000 December 31 2015 Interest expense 19,307 Discount on bonds payable 2,640 Interest payable 16,667Related Questions
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