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Connect https/ heducation.com/flow connect.html?isRege true&returnuri; https%3A%2PX2Fconnect.mheducation com%2 F Fregistration ind HOMEWORK p1,2,5,6,10811 Help Save & Exit Submit Check my work Required information Problem 14-10AB Effective Interest: Amortization of bond; retiring bonds LO P1, P4, P5, P6 [The following information applies to the questions displayed below Ike issues $240,000 of 11%, three-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31, They are issued at $246,087 Their market rate is 10% at the issue date. Problem 14-10AB Part1 Required: 1. Prepare the January 1, 2017, journal entry to record the bonds' issuance. View transaction list Journal entry worksheet Next >

Explanation / Answer

1) Date General Journal Debit Credit 1/1/2017 Cash 246,087 premium on bonds 6,087 Bonds payable 240,000 2) Total bond interest expense over life of bonds Amount repaid 6 payments of 13200 79200 par value at maturity 240,000 Total repaid 319200 less amount borrowed 246,087 total bond interest expense. 73,113 3) period Cash intt Bond intt Premium Unamortized Carrying paid expense amortization premium value 5.50% 5% 1/1/2017 6,087 246,087 6/30/2017 13,200 12304 896 5191 245191 12/31/2017 13,200 12260 940 4251 244251 6/30/2018 13,200 12213 987 3263 243263 12/31/2018 13,200 12163 1037 2227 242227 Date General Journal Debit Credit 6/30/2017 interest expense 12,304 premium on bonds 896 cash 13,200 12/31/2017 interest expense 12,260 premium on bonds 940 cash 13,200 Retirement of bonds 1/1/2019 Bonds payable 240,000 premium on bonds 2,227 Gain on disposal 7,027 cash (240000*.98) 235200

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