In: Accounting
On January 1, 2020, Sarasota Company purchased 8% bonds having a maturity value of $280,000, for $303,589.66. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sarasota Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Prepare the journal entry at the date of the bond purchase.
(Enter answers to 2 decimal places, e.g.
2,525.25. Credit account titles are
automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the
amounts.)
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|
Jan. 1, 2020 |
enter an account title to record the transaction on January 1, 2020 |
enter a debit amount |
enter a credit amount |
enter an account title to record the transaction on January 1, 2020 |
enter a debit amount |
enter a credit amount |
Prepare a bond amortization schedule. (Round answers
to 2 decimal places, e.g. 2,525.25.)
Schedule of Interest Revenue and Bond Premium
Amortization |
|||||||||
---|---|---|---|---|---|---|---|---|---|
|
Cash |
Interest |
Premium |
Carrying Amount |
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1/1/20 |
$enter a dollar amount rounded to 2 decimal places |
$enter a dollar amount rounded to 2 decimal places |
$enter a dollar amount rounded to 2 decimal places |
$enter a dollar amount rounded to 2 decimal places |
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1/1/21 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
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1/1/22 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
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1/1/23 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
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1/1/24 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
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1/1/25 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
Prepare the journal entry to record the interest revenue and the
amortization at December 31, 2020. (Round answers to 2
decimal places, e.g. 2,525.25. Credit account titles are
automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the
amounts.)
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|
Dec. 31, 2020 |
enter an account title to record the transaction on December 31, 2020 |
enter a debit amount |
enter a credit amount |
enter an account title to record the transaction on December 31, 2020 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2020 |
enter a debit amount |
enter a credit amount |
Prepare the journal entry to record the interest revenue and the
amortization at December 31, 2021. (Round answers to 2
decimal places, e.g. 2,525.25. Credit account titles are
automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the
amounts.)
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|
Dec. 31, 2021 |
enter an account title to record the transaction on December 31, 2021 |
enter a debit amount |
enter a credit amount |
enter an account title to record the transaction on December 31, 2021 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2021 |
enter a debit amount |
enter a credit amount |
a) Journal entry at the date of the bond purchase:
b) Amotization Schedule:
A | B | C=E*6% | D=B-C | E=E-D |
Period | Cash Received | Interest Revenue | Amortization | Carrying Value |
0.00 | 0.00 | 0.00 | 0.00 | 303589.66 |
1.00 | 22400.00 | 18215.38 | 4184.62 | 299405.04 |
2.00 | 22400.00 | 17964.31 | 4435.69 | 294969.35 |
3.00 | 22400.00 | 17698.17 | 4701.83 | 290267.52 |
4.00 | 22400.00 | 17416.06 | 4983.94 | 285283.58 |
5.00 | 22400.00 | 17116.42 | 5283.58 | 280000.00 |
c) Journal entry to record the interest revenue and the amortization at December 31, 2020:
d) Journal entry to record the interest revenue and the amortization at December 31, 2020:
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