Please return next Tuesday in Class. The following is the amortization table for

Question

Please return next Tuesday in Class. The following is the amortization table for the first two six-month periods of a s200,000 face value bond that sold for $160,000. The Bonds were sold on April 1, 20xi. Period Amount Owed (beg) Interest Expense Interest Payment Amount owed (end) 160,000 S160,800 S12,800 $12,864 $12,000 $12,000 $160,800 $161,664 Using the amortization table above and the T-accounts on this page, show the necessary accounting entries for (a) the original sale of the bonds on April 1; (b) the first payment date on October 1; (c) the necessary adjusting entries on December 31; (d) the second payment on April 1 of the second year; (e) the repurchase of the bonds by the company on April 1 of the second year for $121,664. Cash Bonds Payable Discount on Bonds Payable Interest Payable Interest Expense

Explanation / Answer

Cash Bonds Payable 1-Apr-11 Bonds payable $160,000 1-Oct-11 Interest payable $12,000 1-Apr-11 Cash $160,000 31-Dec-11 Balance c/d $148,000 31-Dec-11 Balance c/d $200,000 Discount on bonds payable $40,000 $160,000 $160,000 $200,000 $200,000 1-Jan-12 Balance b/d $148,000 1-Apr-12 Interest payable $12,000 1-Apr-12 Cash $121,664 1-Jan-12 Balance b/d $200,000 1-Apr-12 Bonds payable $121,664 1-Apr-12 Discount on bonds payable $25,000 1-Apr-12 Interest payable $1,664 1-Apr-12 Premium on repurchase (b/f) $53,336 $200,000 $200,000 Discount on bonds payable Interest payable 1-Apr-11 Bonds payable $40,000 31-Dec-11 Discounts on bonds Expense $15,000 1-Oct-11 Cash $12,000 30-Sep-11 Interest Expense $12,800 31-Dec-11 Balance c/d $25,000 31-Dec-11 Balance c/d $7,267 31-Dec-11 Interest Expense $6,467 $40,000 $40,000 $19,267 $19,267 1-Jan-12 Balance b/d $25,000 1-Apr-12 Bonds payable $25,000 1-Apr-12 Cash $12,000 1-Jan-12 Balance b/d $7,267 1-Apr-12 Cash(b/f) $1,664 31-Mar-12 Interest Expense $6,397 $13,664 $13,664 Interest Expense Discount on bonds Expense 30-Sep-11 Interest payable $12,800 31-Dec-11 P&L A/c $19,267 31-Dec-11 Discounts on bonds payable $15,000 31-Dec-11 P&L A/c $15,000 31-Dec-11 Interest payable $6,467 $15,000 $15,000 $19,267 $19,267 31-Mar-12 Interest payable $6,397 Premium of Repurchase 1-Apr-12 Bonds payable $53,336

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