PA10-6 (Supplement 10A) Recording Bond Issue, Interest Payments (Straight-Line A

Question

PA10-6 (Supplement 10A) Recording Bond Issue, Interest Payments (Straight-Line Amortization), and Early Bond Retirement [LO 10-S1] On January 1, 2015, Loop Raceway issued 670 bonds, each with a face value of $1,000, a stated interest rate of 6% paid annually on December 31, and a maturity date of December 31, 2017 On the issue date. the market interest rate was 7 percent, so the total proceeds from the bond issue were $652,418. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year Required: 1. Prepare a bond amortization schedule. ges During the P ng iability Balances Discount Period Discount Interest Cash Paid Amortized Expense Payable Payable Ended 01/01/15 12/31/15 1231/16 12/31/17 Payable on Bonds Carrying 2-5. Complete the required journal entries to record the bond issue, interest payments on December 31, 2015 and 2016, bond retirement. Assume the bonds are retired on January 1, 2017, at a price of 97. (If no entry is required for a transactionievent, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the issuance of 670 bonds at face value of $1,000 each for $652,418 Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2015 Record entry Clear entry View general jourmal

Explanation / Answer

Solution 1:

Solution 2-5:

Bond Amorization Schedule - Loop Raceway Period Changes during the period Ending bond liability balances Cash Paid Discount Amortized Interest Expense Bond Payable Discount on bond payable Carrying Value 1-Jan-15 $670,000.00 $17,582.00 $652,418.00 31-Dec-15 $40,200.00 $5,861.00 $46,061.00 $670,000.00 $11,721.00 $658,279.00 31-Dec-16 $40,200.00 $5,861.00 $46,061.00 $670,000.00 $5,860.00 $664,140.00 31-Dec-17 $40,200.00 $5,860.00 $46,060.00 $670,000.00 $0.00 $670,000.00

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