On December 31, 2014, Plank Corporation issued $800,000, 6%, 5-year bonds for $7

Question

On December 31, 2014, Plank Corporation issued $800,000, 6%, 5-year bonds for $735,100. The bonds were sold to yield an effective-interest rate of 8%. Interest is paid annually on December 31. The company uses the effective-interest method of amortization.

Prepare a bond discount amortization schedule which shows the amortization of discount for the first two interest payment dates. (Round answers to O decimal places, e.g. 5,275.) PLANKCORPORATION Bond Discount Amortization Effective-Interest Method-Annual Interest Payments 696 Bonds Issued at 896 Interest Periods Interest to Be PaidInterest ExpenseDiscount AmortizationUnamortized Discount Carrying Value of Bonds 12/13/14(Issue date) 12/31/15 12/31/16

Explanation / Answer

interest interest interest discount unamortized Carrying periods paid expense amortization Discount value 12/13/2014 64900 735,100 12/31/2015 48000 58808 10808 54092 745,908 12/31/2016 48,000 59673 11673 42419 757581 Journal entries Date Account titles & Explanations Debit Credit 12/31/2014 cash 735,100 Discount on bonds payable 64,900 bonds payable 800,000 12/31/2015 interest expense 58,808 discount on bonds payable 10,808 cash 48,000 12/31/2016 interest expense 59,673 discount on bonds payable 11,673 cash 48,000

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