The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2014, and the subsequent interest payments and charges. The company's year-end is December 31, and financial statements are prepared once yearly. Amortization Schedule Year 00 Cash 00 Interest 00 AmountUnamortized 00 CarryingValue 1/1/2014 $5,65100 $94,349 2014 $11,000 $11,322 5,32900 94,671 2015 11,000 11,361 4,96800 95,032 2016 11,000 11,404 4,56400 95,436 2017 11,000 11,452 4,11200 95,888 2018 11,000 11,507 3,60500 96,395 2019 11,000 11,567 3,03800 96,962 2020 11,000 11,635 2,40300 97,597 2021 11,000 11,712 1,69100 98,309 2022 11,000 11,797 89400 99,106 2023 11,000 11,894 00 100,000 Instructions a. Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule. b. Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method, and how you can determine which method is used. c. Determine the stated interest rate and the effective-interest rate. d. On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2014. e. On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2014. (Interest is paid January 1.) f. On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2021. Capulet Corporation does not use reversing entries.

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter14: Long-term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 6PB

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Amortization Schedule
Year	00	Cash	00	Interest	00	Amount Unamortized	00	Carrying Value
1/1/2014			$5,65100	$94,349
2014	$11,000	$11,322	5,32900	94,671
2015	11,000	11,361	4,96800	95,032
2016	11,000	11,404	4,56400	95,436
2017	11,000	11,452	4,11200	95,888
2018	11,000	11,507	3,60500	96,395
2019	11,000	11,567	3,03800	96,962
2020	11,000	11,635	2,40300	97,597
2021	11,000	11,712	1,69100	98,309
2022	11,000	11,797	89400	99,106
2023	11,000	11,894	00	100,000

Instructions

a. Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.

b. Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method, and how you can determine which method is used.

c. Determine the stated interest rate and the effective-interest rate.

d. On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2014.

e. On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2014. (Interest is paid January 1.)

f. On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2021. Capulet Corporation does not use reversing entries.

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