On January 1, 2009, Loop Raceway issued 780 bonds, each with a face value of $1,

Question

On January 1, 2009, Loop Raceway issued 780 bonds, each with a face value of $1,000, a stated interest rate of 5% paid annually on December 31, and a maturity date of December 31, 2011 . On the issue date, the market interest rate was 6 percent, so the total proceeds from the bond issue were $759,135. Loop uses the straight-line bond amortization method Required: 1. Prepare a bond amortization schedule. (Round your answers to the nearest whole dollar amount Leave no cells blank be certain to enter "O" wherever required. Make sure that the unamortized premium or discount equals to '0' and the Carrying value equals to face value of the bond in the last period. Interest expense in the last period should be calculated as Cash Interest (r)discount/()premium amortized.) Changes During the PeriodEnding Bond Liability Balances Period Ended 01/01/09 12/31/09 12/31/10 12/31/11 Cash Paid Discount mortized Bonds Discount on Carrying Interest Expense Payable Bonds Payable Value 2. Give the journal entry to record the bond issue (Round your answers to the nearest whole dollar amount. Omit the "$" sign in your response.) Date General Journal Debit Credit Jan 1 2009 (Click to select) Click to select) (Click to select)

Explanation / Answer

Period Cash Paid C Discount Amortized D Interest Expense C+d Bonds payable Discount on Bonds Payble L-D 1/1/2009 780000 20865 12/31/2009 39000 6955 45955 780000 13910 12/31/2010 39000 6955 45955 780000 6955 12/31/2011 39000 6955 45955 780000 0 Cash Paid=780000*5% 39000 Bond Payable 780000 Less: Issue Price 759135 M Discount on Bond payable 20865 L SLM for 3 years 20865/3 6955 Particulars Dr Cr 1/1/2009 Cash 759135 ans 2 Discount on Bond payable 20865 Bond Payable 780000 ans 3 12/31/2009 Interest expense 45955 Cash 39000 Discount on Bond payable 6955 12/31/2010 Interest expense 45955 Cash 39000 Discount on Bond payable 6955 Ans 4 12/31/2011 Bond Payable 780000 Interest expense 45955 Cash (780000+39000) 819000 Discount on Bond payable 6955 Ans 5 Bond Payable 780000 Gain on sale of retirement (bal. fig) 8645 Cash (780*980) 764400 Discount on Bond payable 6955 Note in question it is given $98 but when it is of worth $1000 so it should be $980 Also see for $98 entry shown below Bond Payable 780000 Gain on sale of retirement (bal. fig) 696605 Cash (780*980) 76440 Discount on Bond payable 6955 I think $98 is a typing error in the question

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