34. Bond interest and discount amortization. Grove Corporation issued $6,000,000

Question

34. Bond interest and discount amortization. Grove Corporation issued $6,000,000 of 8% bonds on October 1, 2017, due on October 1, 2022, The interest is to be paid twice a year on April 1 and October 1 . The bonds were sold to yield 10% effective annual interest. Grove Corporation closes its books annually on December 3 Instructions (a) Complete the following amortization schedule for the dates indicated. (Round all answers to the nearest dollar.) Use the effective-interest method. Debit Credi Carrying Amount Credit Cash InterestExpense of Bonds October, 2017 Apri 1, 2018 October 1, 2018 (b) Prepare the adjusting entry for December 31, 2018. Use the effective-interest method Compute the interest expense to be reported in the income statement for the year ended December 3, 2018 (c)

Explanation / Answer

Answer

A.

2.

Adjusting Entry:

C.

Interest Expense to be Reported = 276834*1/2 + 278676 + 140305 = $557398

Credit cash Debit Interest Expense Credit Bond Discount Carring amount of bonds October 1, 2017 $5,536,676 April 1, 2018 $240,000 $276,834 $36,834 $5,573,510 October 1, 2018 $240,000 $278,676 $38,676 $5,612,186

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