1. Juliet Inc. issued a $200,000 bond on 10/1/2014 with a stated interest rate o
ID: 2962005 • Letter: 1
Question
1. Juliet Inc. issued a $200,000 bond on 10/1/2014 with a stated interest rate of 5% paid annually every Oct 1st for the next 4 years. The premium or discount is amortized using the effective interest method. Using the following amortization schedule, please answer the questions.
Date
Cash Paid
Interest Expense
Amortization
Carry Value
10/1/14
$193,070
10/1/15
$10,000
$11,584
$1,584
$194,654
10/1/16
$10,000
$11,679
$1,679
$196,333
10/1/17
$10,000
$11,780
$1,780
$198,113
10/1/18
$10,000
$11,887
$1,887
$200,000
a. What journal entry would have been made on 10/1/2014
On 12/31/2016, Juliet decided to retire the entire bond early by paying 105 plus any accrued interest. Provide journal entries for the following transactions on 12/31/2016: 1) accrued interest 2) retire bond.
Date
Cash Paid
Interest Expense
Amortization
Carry Value
10/1/14
$193,070
10/1/15
$10,000
$11,584
$1,584
$194,654
10/1/16
$10,000
$11,679
$1,679
$196,333
10/1/17
$10,000
$11,780
$1,780
$198,113
10/1/18
$10,000
$11,887
$1,887
$200,000
Explanation / Answer
10/1/14
DR Cash 193,070
DR Discounts on Bonds Payable 6,930
CR Bonds Payable 200,000
12/31/2016
DR Interest Expense 2945
CR Accrued Interest 2500
CR Amortization of bond discount 445
DR Bonds Payable 200,000
DR Loss on bond redemption 13,222
DR Accrued interest 2500
CR Discount on bonds payable 3,222
CR Cash 212,500
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