Sanford Co. sells $517,800 of 10% bonds on March 1, 2014. The bonds pay interest
ID: 2468160 • Letter: S
Question
Sanford Co. sells $517,800 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%.
Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Round answers to 0 decimal places, e.g.
Date
Difference due to rounding
Prepare all of the relevant journal entries from the time of sale until the date indicated. (Assume that no reversing entries were made.) (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Cash Paid Interst Expense Discount Amortized Carrying amount of Bonds 3/1/14 ? 9/1/14 25,890 29,335 3,445 ? 3/1/15 25,890 ? ? ? 9/1/15 25,890 ? ? ? 3/1/16 25,890 29,993 4,103 ? 9/1/16 25,890 30,239 4,349 ? 3/1/17 25,890 30,500 4,610 ? 9/1/17 25,890 ? ? 517,800Explanation / Answer
1)
Difference due to rounding
2)
Working
Bond Issue Price = Semi Annual Interest*PVIFA(rate,nper) + Face value*PVIF(rate,nper)
Semi Annual Interest= 517800*10%*1/2 = 25890
rate (half yearly) = 12%*1/2 = 6%
nper ( no of semi annual period) = (September 1, 2017 - March 1, 2014 )*2 = 7
Face value = 517800
Bond Issue Price = 25890*PVIFA(6%,7) + 517800*PVIF(6%,7)
Bond Issue Price = 25890*5.582381 + 517800*0.665057
Bond Issue Price = 488,894
Cash Paid Interest Expense(@6%) Discount Amortized Carrying amount of Bonds Date 03/01/2014 488894 09/01/2014 25,890 29334 3,444 492,338 03/01/2015 25,890 29540 3,650 495,988 09/01/2015 25,890 29759 3,869 499,857 03/01/2016 25,890 29991 4,101 503,958 09/01/2016 25,890 30237 4,347 508,305 03/01/2017 25,890 30498 4,608 512,913 09/01/2017 25,890 30775 4,885 517,798Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.