Instructions: You must complete your work in Excel using formulas. Please submit
ID: 2602091 • Letter: I
Question
Instructions: You must complete your work in Excel using formulas. Please submit your Excel file as an attachment to the link provided in the classroom.
Bond interest and discount amortization.
BU Curriculum Corporation issued $900,000 of 7% bonds on November 1, 2017, due on November 1, 2022. The interest is to be paid twice a year on May 1 and November 1. The bonds were sold to yield 9% effective annual interest. BU Curriculum Corporation closes its books annually on December 31.
Instructions
(a) Complete an amortization schedule for the above bond (for all periods) in a similar format as below. (Round all answers to the nearest dollar.) Use the effective-interest method.
Date
Credit
Cash
Debit
Interest Expense
Credit
Bond Discount
Carrying Amount of Bonds
Nov. 1, 2017
Use the PV formula in Excel; see posted bond excel sheet in the classroom
May 1, 2018
….continue schedule (use Excel)
(b) Prepare the journal entries for the following:
1. November 1, 2017 bond issue
2. Adjusting entry for December 31, 2017 (adjusting entry should cover 2 months)
3. May 1, 2018 entry
4. November 1, 2018 entry
5. Adjusting entry from December 31, 2018
(c) Compute the interest expense to be reported in the income statement for the year
ended December 31, 2017 and December 31, 2018.
(d)Complete an amortization schedule for the above bond (for all periods) using the straight-line amortization method (entries are not required).
Bond interest and discount amortization.
BU Curriculum Corporation issued $900,000 of 7% bonds on November 1, 2017, due on November 1, 2022. The interest is to be paid twice a year on May 1 and November 1. The bonds were sold to yield 9% effective annual interest. BU Curriculum Corporation closes its books annually on December 31.
Instructions
(a) Complete an amortization schedule for the above bond (for all periods) in a similar format as below. (Round all answers to the nearest dollar.) Use the effective-interest method.
Date
Credit
Cash
Debit
Interest Expense
Credit
Bond Discount
Carrying Amount of Bonds
Nov. 1, 2017
Use the PV formula in Excel; see posted bond excel sheet in the classroom
May 1, 2018
….continue schedule (use Excel)
(b) Prepare the journal entries for the following:
1. November 1, 2017 bond issue
2. Adjusting entry for December 31, 2017 (adjusting entry should cover 2 months)
3. May 1, 2018 entry
4. November 1, 2018 entry
5. Adjusting entry from December 31, 2018
(c) Compute the interest expense to be reported in the income statement for the year
ended December 31, 2017 and December 31, 2018.
(d)Complete an amortization schedule for the above bond (for all periods) using the straight-line amortization method (entries are not required).
Explanation / Answer
BU Curriculum Corporation $ Face value of bonds 900000 Interest specified on bonds 7% Annual return on face value 63000 Investment required to yield 63000 as 9% of investment 900000 9 7 700000 700000 Discount on issue of bonds 200000 Face value 900000 a Amortization Schedule ($) d. Amortization Schedule $ Date Credit cash Debit interest Credit Carrying Carrying value of bonds = PV of future values expense Bond Discount amount of bonds Amortization of bond discount 20000 Nov 1 2017 31500 31500 ($2,847.55) $897,152.45 2017 2018 01-Nov ($2,847.55) 01-May 31500 31500 ($2,847.55) $894,304.90 ($2,847.55) 01-Nov 31500 31500 ($2,847.55) $891,457.35 2018 ($2,847.55) 2019 01-May ($2,847.55) 01-May 31500 31500 ($2,847.55) $888,609.80 01-Nov ($2,847.55) 01-Nov 31500 31500 ($2,847.55) $885,762.25 2019 ($2,847.55) 2020 01-May ($2,847.55) 01-May 31500 31500 ($2,847.55) $882,914.70 01-Nov ($2,847.55) 01-Nov 31500 31500 ($2,847.55) $880,067.15 2020 ($2,847.55) 2021 01-May ($2,847.55) 01-May 31500 31500 ($2,847.55) $877,219.60 01-Nov ($2,847.55) 01-Nov 31500 31500 ($2,847.55) $874,372.05 2021 ($2,847.55) 01-May ($2,847.55) b 01-Nov ($2,847.55) Journal entries for bond issue Nov 1 2017 Debit Credit Cash 900000 7% Bonds 900000 (Issue of bonds) Nov 1 2017 Interest expense 31500 Cash 31500 (Half-yearly bond interest at 7% of face value) Amortization of bond discount 2848 Bond discount 2848 May 1 2018 Interest expense 31500 Cash 31500 (Half-yearly bond interest at 7% of face value) Amortization of bond discount 2848 Bond discount 2848 Nov 1 2019 Interest expense 31500 Cash 31500 (Half-yearly bond interest at 7% of face value) Amortization of bond discount 2848 Bond discount 2848 May 1 2020 Interest expense 31500 Cash 31500 (Half-yearly bond interest at 7% of face value) Amortization of bond discount 2848 Bond discount 2848 Nov 1 2021 Interest expense 31500 Cash 31500 (Half-yearly bond interest at 7% of face value) Amortization of bond discount 2848 Bond discount 2848 Dec 31 2017 Bond discount 2848 Amortization of bond discount 2848 (Adjusting entry to adjust Bond Discount to be reversed next year) Jan 1 2018 Amortization of bond discount 2848 Bond discount 2848 (Reversing entry) Dec 31 2018 Bond discount 2848 Amortization of bond discount 2848 (Adjusting entry to adjust Bond Discount to be reversed next year) c) Interest expense to be reported in the income statement for the year ended 31-Dec-17 Bond discount at face value 31500 Amortization of bond discount 2848 Bond interest expense 34348 Interest expense to be reported in the income statement for the year ended 31-Dec-18 Bond discount at face value 31500 Amortization of bond discount 2848 Bond interest expense 34348
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