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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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ExerciseInstallment Notes

Refer to the information for Dandy Candy on the previous page.

Required:

Prepare the journal entries for the end of March and the end of April.

To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.

Amortization of Bonds premium or discount:

Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

To prepare:

The journal entries for the end of March and April.

Explanation

The journal entries for the end of March and April are as follows:

Journal Entries
Date Account Titles Debit Credit
Mar. 31, 2021 Interest Expense $ 251.65
Note payable $ 3,662.85
Cash $ 3,914.50
Apr. 30, 2021 Interest Expense $ 227.23
Note payable $ 3,687.27
Cash $ 3,914.50

The Amortization Table using the effective interest rate method is as follows:

Dandy Candy
Amortization Table
Date Beginning Carrying Value Interest Expense Installment Paid Principal Payment Ending Carrying Value
Jan. 1, 2021 45,000 45,000
Jan. 31, 2021 45,000 $ 300...

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