Amortizing Debt Issuance Costs and Bond Premiums On January 1, 2016, Gates Corpo

Question

Amortizing Debt Issuance Costs and Bond Premiums On January 1, 2016, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2020, for $103,604.79 minus bonds carry a stated rate of interest of 13% payable annually on December 31 and were issued to yield 12%. The company uses the effective interest method of amortization to amortize any discounts or premiums and the straight-line method to amortize the debt issuance costs debt issuance costs of $3,000. The Required Prepare the journal entries to record the issuance of the bonds, all the interest payments, premium debt issuance cost amortizations, and the repayment of the bonds. In addition, prepare a bond interest expense and premium amortization schedule for the bonds.

Explanation / Answer

Amortization schedule Date Interest Payment @13% Interest expenses at 12%*G Amortization of Bond cr, balance in the a/c Bond premium a/c Credit balance in the Bond payable Carrying value of Bond Credit cash Debit Interest Expense Bond Premium Jan 1 2016 3605 100000 103604.79 Dec 31 2016 13000 12433 567 3037 100000 103037.36 Dec,31 2017 13000 12364 636 2402 100000 102401.85 Dec,31 2018 13000 12288 712 1690 100000 101690.07 Dec,31 2019 13000 12203 797 893 100000 100892.88 Dec,31 2020 13000 12107 893 0 100000 100000 Date Accounts Title Dr Cr Jan 1 2016 Cash 100604.79 Bond Issue cost 3000 Bonds Payable 100000 Premium on bonds payable 3604.79 dec 31   2016 Interest expenses 12433 Premium on bonds payable 567 Cash 13000 Bond Issue expenses 600 Bond Issue cost 600 dec 31   2017 Interest expenses 12364 Premium on bonds payable 636 Cash 13000 Bond Issue expenses 600 Bond Issue cost 600 dec 31   2018 Interest expenses 12288 Premium on bonds payable 712 Cash 13000 Bond Issue expenses 600 Bond Issue cost 600 dec 31   2019 Interest expenses 12203 Premium on bonds payable 797 Cash 13000 Bond Issue expenses 600 Bond Issue cost 600 dec 31   2020 Interest expenses 12107 Premium on bonds payable 893 Cash 13000 Bond Issue expenses 600 Bond Issue cost 600 dec 31   2020 Bonds payable 100000 Cash 100000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.