Exercise 10-22 Cole Corporation issued $531,000, 8%, 24-year bonds on January 1,
ID: 2456714 • Letter: E
Question
Exercise 10-22
Cole Corporation issued $531,000, 8%, 24-year bonds on January 1, 2014, for $435,582. This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable annually on January 1. Cole uses the effective-interest method to amortize bond premium or discount.
Prepare the schedule using effective-interest method to amortize bond premium or discount of Cole Corporation.
Interest
Periods
Interest to Be Paid
Interest Expense to Be Recorded
Unamortized Discount
Bond Carrying Value
Prepare the journal entries to record the issuance of the bonds.
Prepare the journal entries to record the accrual of interest and the discount amortization on December 31, 2014.
Prepare the journal entries to record the payment of interest on January 1, 2015.
Interest
Periods
Interest to Be Paid
Interest Expense to Be Recorded
Discount AmoritizationUnamortized Discount
Bond Carrying Value
Issue Date 1 2Explanation / Answer
Solution:
(A).
Interest
Periods
Interest to Be Paid
Interest Expense to Be Recorded
Unamortized Discount
Bond Carrying Value
Interest Expences 95,580
Interest Payable 53,100
Discounts Payable 42,480
(B).
Cash 5,84,100
Bonds Payable 5,31,000
Premium on Bonds Payable 53,100
(C).
Cash 4,77,900
Discounts on Bonds Payable 53,100
Bonds Payable 5,31,000
(D).
Interest Expencess 53,100
Cash 53,100
Interest
Periods
Interest to Be Paid
Interest Expense to Be Recorded
Discount AmoritizationUnamortized Discount
Bond Carrying Value
Issue Date Jan-1-14 53,100 53,100 53,100 4,77,900 Jan-1-15 47,790 47.790 47,790 47,790 4,30,110Related Questions
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