Exercise 14-10 On January 1, 2017, Skysong Company sold 11% bonds having a matur

Question

Exercise 14-10 On January 1, 2017, Skysong Company sold 11% bonds having a maturity value of $480,000 for $537,493, which provides the bondholders with a 8% yield. The bonds are dated January 1, 2017, and mature January 1, 2022, with interest payable December 31 of each year. Skysong Company allocates interest and unamortized discount or premium on the effective-interest basis. Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2017 SHOW LIST OF ACCOUNTS Prepare a schedule of interest expense and bond amortization for 2017-2019. (Round answer to 0 decimal places, e.g. 38,548.) Schedule of Interest Expense and Bond Premium Amortization Effective-Interest Method Cash Paid Premium Amortized Carrying Amount of Bonds Interest Date Expense 12/31/17 12/31/18 12/31/19 SHOW LIST OF ACCOUNTS

Explanation / Answer

Date Account Head & Description Debit Amount Credit Amount Jan 1, 2017 Cash 537493 11% Bonds payable 480000 Premium on issue of bonds 57493 (to record the bond issurance) Schedule of interest expense and Bond premium amortization Effective Interest method Date Cash paid (a) Interest expense (b) Premium Amortized (c = a-b) Carrying Amount of Bonds 01/01/2017 537493 12/31/2017 52800   (480000*11%) 42999.44 9800.56 527692.44 (537493*8%) 12/31/2018 52800           42,215.40            10,584.60     5,17,107.84 (527692.44*8%) 12/31/2019 52800           41,368.63            11,431.37     5,05,676.46 (517107.84*8%) Date Account Head & Description Debit Amount Credit Amount Dec 31, 2017 Interets expenses 42999.44 Premium on issue of bonds 9800.56 Cash 52800 (to record the interest expenses & amortization) Date Account Head & Description Debit Amount Credit Amount Dec 31, 2019 Interets expenses 42215.4 Premium on issue of bonds 10584.6 Cash 52800 (to record the interest expenses & amortization)

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