Question

ATD Corporation starts its business in January 1, 2010 in Buford, GA to produce and sell mobile homes. On January 1, 2010, ATD Corporation issued $1,200,000 of ten-year, 7% bonds at an effective interest rate of 8% at a discount for 1,119,479.03. Interest on the bonds is payable annually on December 31. The fiscal year of the company is the calendar year. 1. Based on the above information, prepare the initial journal entry by ATD Corporation to record the issuance of bonds on January 1, 2010. Please show supporting computations in Excel for your journal entry. 2. Suppose ATD Corporation uses straight-line method for bond amortization, prepare a bond amortization table on the worksheet for ATD. Print the amortization table in good format. 3. Based on the table in (2), prepare journal necessary journal entry(ies) for ATD for the following dates: a. 12/31/2010 b. 1/1/2011 c. 12/31/2014 d. 12/31/2019 e. 1/1/2020 when ATD paid off its bonds payable. 4. Based on the table in (2), suppose ATD retires half of its bonds on October 1, 2015 at 102, prepare necessary journal entry(ies) for ATD for the following dates: a. 9/30/2015 b. 10/1/2015 c. 12/31/2019 d. 1/1/2020 when ATD paid off its bonds payable. 5. Suppose ATD Corporation uses effective-interest method for bond amortization, prepare a bond amortization table on the worksheet for ATD. Print the amortization table in goof format. 6. Based on the table in (5), prepare journal necessary journal entry(ies) for ATD for the following dates: a. 12/31/2010 b. 1/1/2011 c. 12/31/2014 d. 12/31/2019 e. 1/1/2020 when ATD paid off its bonds payable. 7. Based on the table in (5), suppose ATD retires half of its bonds on October 1, 2015 at 102, prepare necessary journal entry(ies) for ATD for the following dates: a. 9/30/2015 b. 10/1/2015 c. 12/31/2019 d. 1/1/2020 when ATD paid off its bonds payable. Required: Turn in printouts from Steps 1-7 in good format. Save the results as Exercise9.xls.

Answer 1

Date	Particulars	Amount DR	Credit CR
Jan-10	Cash A/c Dr	11,19,479.03
	Discount on Bonds DR	80,520.97
	To 7% Bonds Payable		12,00,000.00
	(Being bonds issued at discount)
Bond Amortization Table on Straight line basis
	No of Year	10
	Discount	80520.97
	Amortisation Every Year	8052.09
Date	Particulars	Amount DR	Credit CR
Dec-10	Interest A/c DR	84,000.00
	To Cash		84,000.00
	(Being Interest paid)
	Discount Amortised on Bonds Dr	8,052.09
	To Discount on Bonds		8,052.09
	(Being Discount Amortised over Straight line basis)
01-01-2011	No Entry
31-12-2014	Interest A/c DR	84,000.00
	To Cash		84,000.00
	(Being Interest paid)
	Discount Amortised on Bonds Dr	8,052.09
	To Discount on Bonds		8,052.09
	(Being Discount Amortised over Straight line basis)
31-12-2019	Interest A/c DR	84,000.00
	To Cash		84,000.00
	(Being Interest paid)
	Discount Amortised on Bonds Dr	8,052.09
	To Discount on Bonds		8,052.09
	(Being Discount Amortised over Straight line basis)
01-01-2020	7% Bonds Payable DR	12,00,000.00
	To Cash		12,00,000.00
	(Being bonds redeemed)
Calculation of Discount on Bonds to be amotised for half of the bonds which are amortised
On 01-10-2015, 5 years bonds Discount has been amortised
Balance 5 Year	4,026.00
For 5 Years	20,130.00
Date	Particulars	Amount DR	Credit CR
Sep-15	Discount Amortised on Bonds Dr	20,130.00
	To Discount on Bonds		20,130.00
	(Being Discount Amortised over Straight line basis)
	(8052/2=4026*5 (Remaining years)
01-10-2015	7% Bonds Payable DR	6,00,000.00
	Premium Paid on Bonds (6000*2) DR	12,000.00
	Interest A/c DR	31,500.00
	To Cash		6,43,500.00
	(Being bond repaid on premium)
31-12-2019	Interest A/c DR	42,000.00
	To Cash		42,000.00
	(Being Interest paid) on 6,00,000
	Discount Amortised on Bonds Dr	4,026.00
	To Discount on Bonds		4,026.00
	(Being Discount Amortised over Straight line basis)
01-01-2020	7% Bonds Payable DR	6,00,000.00
	To Cash		6,00,000.00
	(Being bonds redeemed)
Effective Interest Method -Table
Amortisaation Table as per Effective Interest Method
	Cash Interest	Interest Expense	Amortisation
0	NA	NA	NA
2010	84,000.00	89,558.32	-5,558.32
2011	84,000.00	90,002.99	-6,002.99
2012	84,000.00	90,483.22	-6,483.22
2013	84,000.00	91,001.88	-7,001.88
2014	84,000.00	91,562.03	-7,562.03
2015	84,000.00	92,167.00	-8,167.00
2016	84,000.00	92,820.36	-8,820.36
2017	84,000.00	93,525.98	-9,525.98
2018	84,000.00	94,288.06	-10,288.06
2019	84,000.00	95,111.11	-11,111.11
Effective Interest Method
Date	Particulars	Amount DR	Credit CR
Dec-10	Interest A/c DR	84,000.00
	To Cash		84,000.00
	(Being Interest paid)
	Discount Amortised on Bonds Dr	5,558.32
	To Discount on Bonds		5,558.32
	(Being Discount Amortised over Straight line basis)
01-01-2011	No Entry
31-12-2014	Interest A/c DR	84,000.00
	To Cash		84,000.00
	(Being Interest paid)
	Discount Amortised on Bonds Dr	7,562.03
	To Discount on Bonds		7,562.03
	(Being Discount Amortised over Straight line basis)
31-12-2019	Interest A/c DR	84,000.00
	To Cash		84,000.00
	(Being Interest paid)
	Discount Amortised on Bonds Dr	11,111.11
	To Discount on Bonds		11,111.11
	(Being Discount Amortised over Straight line basis)
01-01-2020	7% Bonds Payable DR	12,00,000.00
	To Cash		12,00,000.00
	(Being bonds redeemed)

.

Bonds retires at 102 50%
	Balance amount to be written off	47912.5
	(8167+8820.36+9525.98+10288.06+11111.11)
	50% Bonds retired	23956.25
	Amount to be written off in Oct 2015	23956.25
Date	Particulars	Amount DR	Credit CR
Sep-15	Discount Amortised on Bonds Dr	23,956.25
	To Discount on Bonds		23,956.25
	(Being Discount Amortised )

31-12-2019	Interest A/c DR	42,000.00
	To Cash		42,000.00
	(Being Interest paid) on 6,00,000
	Discount Amortised on Bonds Dr	5,555.56
	To Discount on Bonds		5,555.56
	(Being Discount Amortised over Straight line basis)

Rest entries remain same as in above criteria, My character limit is exceeding if repeating same.