Cheyenne Co. sells $528,000 of 10% bonds on March 1, 2017. The bonds pay interes
ID: 2568894 • Letter: C
Question
Cheyenne Co. sells $528,000 of 10% bonds on March 1, 2017. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2020. The bonds yield 12%. 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.)
a. 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.)
b. Prepare all of the relevant journal entries from the time of sale until the date indicated. (Assume that no reversing entries were made.) (Round present value factor 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 account titles are automatically indented when amount is entered. Do not indent manually.)
c. Ayayai Co. sells $390,000 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 10%. On October 1, 2018, Ayayai buys back $120,900 worth of bonds for $124,900 (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.)
d. Prepare all of the relevant journal entries from the time of sale until the date indicated. Give entries through December 1, 2019. (Assume that no reversing entries were made.) (Round present value factor 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 account titles are automatically indented when amount is entered. Do not indent manually.)
Explanation / Answer
Schedule of Bond Premium Amortzaton Effective-Interest Method 12% Bonds Sold To Yield 10% Date Cash Paid Interest Expense Bond Discount Carrying amount of bonds 03/01/2017 26400 498,548 09/01/2017 26400 29,913 (3,513) 502,061 03/01/2018 26400 30,124 (3,724) 505,785 09/01/2018 26400 30,347 (3,947) 509,732 03/01/2019 26400 30,584 (4,184) 513,916 09/01/2019 26400 30,835 (4,435) 518,350 03/01/2020 26400 31,101 (4,701) 523,051 09/01/2020 26400 31,383 (4,983) $528,000 rounded off MATURITY VALUE OF BONDS PAYABLE $528,000 PRESENT VALUE OF $528,000 DUE IN 7 PERIODS AT 6% 528000*0.6651 351,173 PRESENT VALUE OF $26400 SEMIANNUAL INTEREST 528000*5%=26400 26400*5.5824 147,375 PROCEEDS FROM SALE OF BONDS 498,548 Discount on bond $29,452 03/01/2017 Cash 498,548 Bond Discount $29,452 Bonds Payable $528,000 09/01/2017 Interest Expense 29,913 Bond Discount 3,513 Cash 26,400 12/31/2017 Interest Expense ($30,124 X 4/6) 20083 Bond Discount (3,724*4/6) 2483 Interest Payable (26,400*4/6) 17600 03/01/2018 Interest Expense ($30,124 X 2/6) 10041 Interest Payable 17600 Bond Discount (3,724*2/6) 1241 Cash 26,400 09/01/2018 Interest Expense 30,347 Bond Discount 3,947 Cash 26,400 12/31/2018 Interest Expense ($30,584 X 4/6) 20389 Bond Discount (4184*4/6) 2789 Interest Payable (26,400*4/6) 17600 03/01/2019 Interest Expense ($30,584X 2/6) 10195 Interest Payable 17600 Bond Discount (4184*2/6) 1395 Cash 26,400 09/01/2019 Interest Expense 30,835 Bond Discount 4,435 Cash 26,400 12/31/2019 Interest Expense ($31,101 X 4/6) 20734 Bond Discount (4701*4/6) 3134 Interest Payable (26,400*4/6) 17600 03/01/2020 Interest Expense ($31,101 X 2/6) 10367 Interest Payable 17600 Bond Discount (4184*2/6) 1,567 Cash 26,400 09/01/2020 Interest Expense 31,383 Bond Discount 4,983 Cash 26,400
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