Answered: Recording Bond Entries and Preparing an…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 72E: Exercise Interest Payments and Interest Expense for Bonds (Straight Line) On January 1, 2020, Perry...

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Recording Bond Entries and Preparing an Amortization Schedule—Effective Interest Method, Premium

Mitchell Inc. issued 198, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums.

Required

a. Determine the selling price of the bonds. Round amount to the nearest whole dollar.

b. Prepare an amortization schedule for the full bond term.

c. Prepare journal entries on the following dates.

1. January 1, 2020, bond issuance.

2. June 30, 2020, interest payment.

3. December 31, 2020, interest payment.

С.
• Note: List multiple debits or credits (when applicable) in alphabetical order.
• Note: Round your answers to the nearest whole dollar.
Date
Account Name
Dr.
Cr.
1. Jan. 1, 2020
2. Jul. 1, 2020
3. Dec. 31, 2020

b.
• Note: Round amounts in schedule to the nearest whole dollar. Use rounded amounts for later calculations in the schedule.
• Note: Include any net rounding difference for Bond Payable, Net in the interest expense amount for Dec. 31, 2022.
Date
Cash
Interest Expense Discount Amortization Bonds Payable, Net
Jan. 1, 2020
$
July 1, 2020
2$
2$
$
Dec. 31, 2020
July 1, 2021
Dec. 31, 2021
July 1, 2022
Dec. 31, 2022
Total
$
2$
2$

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