Cullumber Co. sells $396,000 of 12% bonds on June 1, 2017. The bonds pay interes

Question

Cullumber Co. sells $396,000 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 8%. On October 1, 2018, Cullumber buys back $118,800 worth of bonds for $125,800 (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.)

WileyPLUS x C IChegg.com e Chegg Study l Guided Sc × ? e Titania Co. Sells $41 1, 50C x Ameenah ? Secure ! https://edugen.wileyplus.com/edugen/lti/main.uni Apps a Track Package Spring2018 Return to Blackboard WileyPLSmedciate Aeceumating 16e TOR PRINTER VERSION BACK ASSIGNMENT RESOURCES Cullumber Co. sells $396,000 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 8%. On October 1, 2018. Cullum ber buys back $118,900 worth of bonds for $125,800 (includes accrued interast) (SP181 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 o decimal places, e.g. 38,548.) Prob em 14-8 Effective Interest Method Bonds Sold to Yield Cash Paid Carrying Amount of Bonds Interest Discount Date 12/1/18 12/1/19 6/1/20 12/1/20 6/1/21 *Difference duc to rounding Prepare all of tha relevant journal antries from the tme cf sale until the data indicated. Give entries through December 1, 2019. Assume that no reversing ?ntrie; wara mada (Round Present value actor 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 Type here to search 4/26/2018

Explanation / Answer

Price of the bond = c × F × (1 ? (1 + r)-t)/r+F(1 + r)t C=Interest Rate F= Face Value r=Market Interest Rate Price of Bond= Present value of Interest payments+Present value of the bond Price of Bond 23760*(1-(1.04)^-8)/.04)+396000/(1.06)^8 discount factor taken upto 5 decimal (23760*(1-.73069)/.04)+396000*.73069 449323 Interest payment (396000*6%) 23760 Price of The bonds 449323 Less: Par value 396000 Premuim 53323 A B C D E G               $ Date Cash paid (6%) Interest expenses at 4%*G Premium unamortized premium Carrying value of Bond June 1 2017 53323 449323 Dec 1 2017 23760 17973 5787 47536 443536 June 1 2018 23760 17741 6019 41518 437518 Dec 1 2018 23760 17501 6259 35258 431258 June 1 2019 23760 17250 6510 28749 424749 Dec 1 2019 23760 16990 6770 21979 417979 June 1 2020 23760 16719 7041 14938 410938 Dec 1 2020 23760 16438 7322 7615 403615 June 1 2021 23760 16145 7615 0 396000 6/1/2017 Cash 449323 Bonds Payable 396000 Premium on Bonds Pyable 53323 12/1/2017 Interest expenses 17973 Premium on Bonds Pyable 5787 Cash 23760 12/21/2017 Interest expenses (17741*1/6) 2957 Premium on Bonds Pyable 1003 Interest payable (23760/6) 3960 6/1/2018 Interest expenses (17741*5/6) 14785 Interest payable 3960 Premium on Bonds Pyable (6019/6*5) 5016 Cash 23760 10/1/2018 Interest expenses (17501*4/6) 11667 Premium on Bonds Pyable (6259*4/6) 4173 Interest payable (23760/6*4) 15840 10/1/2018 Bonds Payable 118800 Premium on Bonds Pyable 11204 Interest payable 15840 Cash 125800 Gain on redemption of bonds 20044 Premium on Bonds Pyable Unamortized premium 37345 (41518-4173) Unamortized premium for buy back 37345/396000*118800 11203.5

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