10.10A *Problem 10-1OA On January 1, 2014, Lock Corporation issued $1,819,000 fa
ID: 2497446 • Letter: 1
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10.10A
*Problem 10-1OA On January 1, 2014, Lock Corporation issued $1,819,000 face value, 5%, 10- year bonds at $1,563,482. This price resulted in an effective-interest rate of 7% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest January 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2014. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 Prepare an amortization table through December 31, 2016 (three interest periods) for this bond issue. (Round answers to 0 decimal places, e.g. 125.,) LOCK CORP Bond Discount Amortization Effective-Interest Method-Annual Interest Payments Annual nterest Periods nterest to Be Paid nterest Expense to Be Recorded Bond Carrying Value Discount Amortization Unamortized Discount Issue date 1 2 3 Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2014. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) DAte Account Titles and Explanation Debit Credit Dec. 31 Prepare the journal entry to record the payment of interest on January 1, 2015. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)Explanation / Answer
Answer:1 Journal entry to record the issuance of bonds:
1 jan 2014
Cash A/C DR. $1563482
Discount on bonds payable A/C Dr. $255518
To Bonds Payable A/C $1819000
Answer: Amortization table:
Answer:The journal entry to record the accrual of interest and the amortization of the discount on December 31, 2014.
31 Dec 2014
Bond interest expense A/C Dr. $109443.74
To Discount on bonds payable A/C $18493.74
To Bond interest payable A/C $90950
Answer: The journal entry to record the payment of interest on 1 jan 2015:
31 dec
Bond interest expense A/C Dr. $109443.74
To Discount on Bonds Payable A/C $18493.74
To cash A/C $90950
Answer: Bond interest expense A/C dr. $90950
To cash A/c $90950
Answer: 31 dec 2015:
Bond interest expense A/C Dr. $92852.0418
To Discount on bonds payable A/C $1902.0418
To Bond interest payable A/C $90950
LOCK CORP. Bond Discount Amortization Effective- Interest Method-Annual Interest Payment Annual interest periods Interest to be paid (A) Interest expense to be recorded (B) Discount amortization (C )=(B-A) Unamortized discount (D)=(D-C) Bond carrying value€=(1819000-D) Issue date $255,518 $1,563,482 1 90950 109443.74 18493.74 $237,024 $1,326,458 2 90950 92852.0418 1902.0418 $235,122 $1,091,336 3 90950 76393.48653 -14556.51347 $249,679 $841,657Related Questions
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