Sanford Co. sells $528,000 of 8% bonds on March 1, 2014. The bonds pay interest

Question

Sanford Co. sells $528,000 of 8% 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. 38,548.)

Schedule of Bond Discount Amortization
Effective-Interest Method
Bonds Sold to Yield

* 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.)

3/1/14

9/1/14

12/31/14

3/1/15

9/1/15

12/31/15

Date Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds 3/1/14 9/1/14 3/1/15 9/1/15 3/1/16 9/1/16 3/1/17 9/1/17

Explanation / Answer

Pv Factor 6% 7 period Value of bond Present value of maturity value 528000 0.665057114 351150.2 Presnet value of interest 21120 5.58238144 117899.9 Value of bond 469050.1 Face value 528000.0 Discount 58949.9 Date Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds 03-01-2014 58950 469050 1 09-01-2014 21120 28143 51927 476073 2 03-01-2015 21120 28564.38 44483 483517 3 09-01-2015 21120 29011.05 36592 491408 4 03-01-2016 21120 29484.51 28227 499773 5 09-01-2016 21120 29986.38 19361 508639 6 03-01-2017 21120 30518.36 9962 518038 7 09-01-2017 21120 31082.26 0 528000 3/1/14 Cash 469050 Discount On Bond 58950 Bond Payable 528000 9/1/14 interest expense 28143 Cash 21120 Discount Amortised 7023 12/31/14 interest expense(28564*4/6) 19043 Interest Payable(21120*4/6) 14080 Discount Amortised 4963 3/1/15 interest expense(28564*2/6) 9521 Interest Payable(21120*4/6) 14080 Discount Amortised 2481 Cash 21120 9/1/15 interest expense 29011 Cash 21120 Discount Amortised 7891 12/31/15 interest expense(29484*4/6) 19656 Interest Payable(21120*4/6) 14080 Discount Amortised 5576 647455 647455

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