Oriole Co. sells $404,000 of 12% bonds on June 1, 2017. The bonds pay interest o
ID: 2396801 • Letter: O
Question
Oriole Co. sells $404,000 of 12% bonds on June 1, 2017. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2021. The bonds yield 10%. On October 1, 2018, Oriole buys back $125,240 worth of bonds for $130,240 (includes accrued interest).
Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Round answers to 0 decimal places, e.g. 38,548.)
Schedule of Bond Discount Amortization
Effective-Interest Method
Bonds Sold to Yield
Date Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds
6/1/17 $ $ $ $
12/1/17
6/1/18
12/1/18
6/1/19
12/1/19
6/1/20
12/1/20
6/1/21
* Difference due to rounding
Prepare all of the relevant journal entries from the time of sale until the date indicated. Give entries through December 1, 2019. (Assume that no reversing entries were made.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Explanation / Answer
Solution :
Computation of bond price Table values are based on: n= 8 i= 5% Cash flow Table Value Amount Present Value Par (Maturity) Value 0.67684 $404,000 $273,443 Interest (Annuity) 6.46321 $24,240 $156,668 Price of bonds $430,112Related Questions
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