Martino Motor Corporation issued $200,000 of 10% bonds for 216,221 The bonds were dated April 1,...

Martino Motor Corporation issued $200,000 of 10% bonds for 216,221 The bonds were dated April 1, 2018, are due March 31, 2023 (5years), and pay interest semi-annually on September 30 and March 31. The market yield for bonds of similar risk and maturity was 8%. Bats fiscal year end is December 31.

1. Prepare a bond amortization schedule using the straight-line method

2. Prepare a bond amortization schedule using the effective interest method

3. Prepare the journal entries for (a) issuance of bonds and (b) first interest payment using the effective interest method.

Expert Solution

(1)- Bond amortization schedule using the straight-line method

Semiannual Period	Cash Interest Paid	Bond Interest Expense	Amortization of Premium	Unamortized Premium	Carrying Value

01/04/2018	-	-	-	16,221	2,16,221
30/09/2018	10,000	8,378	1,622	14,599	2,14,599
31/03/2019	10,000	8,378	1,622	12,977	2,12,977
30/09/2019	10,000	8,378	1,622	11,355	2,11,355
31/03/2020	10,000	8,378	1,622	9,733	2,09,733
30/09/2020	10,000	8,378	1,622	8,111	2,08,111
31/03/2021	10,000	8,378	1,622	6,488	2,06,488
30/09/2021	10,000	8,378	1,622	4,866	2,04,866
31/03/2022	10,000	8,378	1,622	3,244	2,03,244
30/09/2022	10,000	8,378	1,622	1,622	2,01,622
31/03/2023	10,000	8,378	1,622	-	2,00,000

	$100,000	$83,799	$16,221

(2)- Bond amortization schedule using the effective interest method

Semiannual Period	Cash Interest Paid	Bond Interest Expense	Amortization of Premium	Unamortized Premium	Carrying Value

01/04/2018	-	-	-	16,221	2,16,221
30/09/2018	10,000	8,649	1,351	14,599	2,14,870
31/03/2019	10,000	8,595	1,405	12,977	2,13,465
30/09/2019	10,000	8,539	1,461	11,355	2,12,003
31/03/2020	10,000	8,480	1,520	9,733	2,10,483
30/09/2020	10,000	8,419	1,581	8,111	2,08,903
31/03/2021	10,000	8,356	1,644	6,488	2,07,259
30/09/2021	10,000	8,290	1,710	4,866	2,05,549
31/03/2022	10,000	8,222	1,778	3,244	2,03,771
30/09/2022	10,000	8,151	1,849	1,622	2,01,922
31/03/2023	10,000	8,078	1,922	-	2,00,000

	$100,000	$83,799	$16,221

(3). Journal entries for (a) issuance of bonds and (b) first interest payment using the effective interest method

(a)-Entry to record the issuance of bond

Account Titles and Explanation	Debit ($)	Credit ($)

Cash A/c	216,221
To Bond Payable A/c		200,000
To Premium on Bond Payable A/c		16,221

Issue Price of Bond = $216,221

Face Value of Bond = $200,000

Premium on Bond Payable = $16,221 [$216,221 – 200,000]

(b)-Entry to record the first interest payment using the effective interest method.

Account Titles and Explanation	Debit ($)	Credit ($)

Interest Expenses A/c	8,649
Premium on Bond Payable A/c	1,351
To Cash A/c		10,000

ekkarill92 answered 1 year ago

On February 1, 2018 Cromley Motor Products issued 10% bonds, dated February 1, with a face...

On February 1, 2018 Cromley Motor Products issued 10% bonds, dated February 1, with a face amount of $90 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 12%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $90,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31.use FVof 1$, PV of 1$ etc.) Required: 1. Determine...

On February 1, 2021, Cromley Motor Products issued 10% bonds, dated February 1, with a face...

On February 1, 2021, Cromley Motor Products issued 10% bonds, dated February 1, with a face amount of $90 million. The bonds mature on January 31, 2025 (4 years). The market yield for bonds of similar risk and maturity was 12%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $90,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1,...

1. Sage Corporation issued $516,000 of 6% bonds on May 1, 2017. The bonds were dated...

1. Sage Corporation issued $516,000 of 6% bonds on May 1, 2017. The bonds were dated January 1, 2017, and mature January 1, 2020, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Sage’s journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. 2. The Cullumber Company issued $220,000 of 8% bonds on January 1, 2017. The bonds...

Bats Corporation issued $800,000 of 12% face value bonds for $851,705.70. The bonds were dated and...

Bats Corporation issued $800,000 of 12% face value bonds for $851,705.70. The bonds were dated and issued on April 1, 2016, are due March 31, 2020, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the...

Obsidian Mining, Inc. issued a series of 5.2%, $200,000 bonds on April 1, 2020. The bonds...

Obsidian Mining, Inc. issued a series of 5.2%, $200,000 bonds on April 1, 2020. The bonds will pay interest semi-annually on September 30 and March 31 and mature in 10 years. At the time of issuance, the market rate of interest was 4.8%. Instructions Record the journal entry for the issuance of the bonds on April 1, 2020. Record the journal entry for the first interest payment on September 30, 2020. Record the year-end accrual for interest on December 31,...

On January 1, 2012, Hess Corporation issued $200,000 of 9% 10 year bonds at 103, with...

On January 1, 2012, Hess Corporation issued $200,000 of 9% 10 year bonds at 103, with interest payable on July 1 and December 31 of each year. Hess uses straight-line amortization. On June 30, 2015, Hess retired $100,000 of these bonds at 98 plus accrued interest. What gain or loss should Hess record as a gain or loss on retirement of these bonds? Prepare the journal entry.

Blackberry Corporation sold $2,500,000 of 10 year 8% bonds on January 1, 2018. The bonds were dated...

Blackberry Corporation sold $2,500,000 of 10 year 8% bonds on January 1, 2018. The bonds were dated January 1, 2018 and pay interest on July 1 and January 1. Blackberry uses the straight-line method to amortize and bond premium or discount. Blackberry’s year end is December 31. Instructions: a. Prepare all the necessary journal entries to record the issue of the bonds and bond interest expense for 2018, assuming: 1. that the bonds sold at 100 (face value) 2. that the bonds sold at 103 3. that...

Torrs corporation issued 10,000,000, 6.5 Percent bonds dated April 1,2018. The market rate of interest was...

Torrs corporation issued 10,000,000, 6.5 Percent bonds dated April 1,2018. The market rate of interest was 7 percent with interest paid each March 31. The bonds mature In three years on March 31st,2021. Tors fiscal year ends on December 31. 1. What was the issue price of these bonds 2. Compute the bonds interest expense for fiscal year 2018. The company uses the effective interest method of amortization 3. Show how the bonds should be reported on the statement kf...

On February 1, 2021, Cromley Motor Products issued 7% bonds, dated February 1, with a face...

On February 1, 2021, Cromley Motor Products issued 7% bonds, dated February 1, with a face amount of $60 million. The bonds mature on January 31, 2025 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $60,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1,...

On February 1, 2021, Cromley Motor Products issued 6% bonds, dated February 1, with a face...

On February 1, 2021, Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $75 million. The bonds mature on January 31, 2025 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $75,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31 Required: 1. Determine the price of the bonds issued...

Question