Celine Dion Company issued $1,092,000 of 10%, 20-year bonds on January 1, 2014,
ID: 2482794 • Letter: C
Question
Celine Dion Company issued $1,092,000 of 10%, 20-year bonds on January 1, 2014, at 102. Interest is payable semiannually on July 1 and January 1. Celine Dion Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%.
Prepare the journal entries to record the following. (Round answers to 0 decimal places, e.g. 38,548. 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
Amortisation schedule
Amortisation schedule
A B C D E F G Date Interest payment stated Interest Expense Amortization of Bond Credit Balance in Credit Balance in Book value of 5% * Face Value Mkt 9.7705/2 = 4.88525 * Premium Bond Premium Account Bonds Payable Account the bonds Previous Book Value in G C - B F + E Credit Cash Debit Interest Expense Debit Bond Premium 01-Jan-14 21840 1092000 1113840 01-Jul-14 54600 54413.87 -186.13 21653.87 1092000 1113653.87 31-Dec-14 54600 54404.78 -195.22 21458.64 1092000 1113458.64 Calculation of interest payment stated = 1092000 *5% = 54600 Journal Entries 01-Jan-14 Cash Dr 1113840 Bonds Payable Cr 1092000 Premium on Bonds Payable Cr 21840 ( To record issuance of bonds at a premium of $ 2) 01-Jul-14 Interest Expense Dr 54413.87 Premium on Bonds Payable Dr 186.13 Cash Cr 54600.00 ( To record payment of interest and related amortization) 31-Dec-14 Interest Expense Dr 54404.78 Premium on Bonds Payable Dr 195.22 Interest accrued Cr 54600.00 ( To record accrual of interest and related amortization)Related Questions
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