Question

Lemon Co. sells $1,000,000 of 10% bonds on August 1, 2017. The bonds pay interest on February 1 and August 1. The due date of the bonds is August 1, 2020. The bonds yield 12%. On October 1, 2018, Lemon Co. buys back $200,000 worth of bonds for $218,000 (includes accrued interest). Give entries through October 1, 2018.

When doing the amortization table, please show your work in excel! Thanks

Answer 1

Present value of face amount = 1000000 * 0.70496 = 704961
Present value of interest = 50000 * 4.91732 = 245866
Total value of bond	950827

Date	Account Head	Debit	Credit
01-08-2017	Cash	9,50,827
	Discount on Bond Liability	49,173
	Bond Liability		10,00,000
31-12-2017	Interest Expense	47542
	Discount on Bond Liability		5875	7050*5/6
	Interest Liability		41667	50000*5/6
01-02-2018	Interest liability	41667
	Interest expense	9508
	Discount on bond liability		1175
	Cash		50000
01-08-2018	Interest expense	57743
	Discount on bond liability		7743
	Cash		50000
01-10-2018	Interest expense	3861		57921*0.20*2/6
	Discount on bond liability		528	7921*0.20*2/6
	Cash		3333
01-10-2018	Bond Liability	200000
	Loss on redemption *	21069
	Discount on bond liability		6402
	Cash		214667
31-12-2018	Interest expense	38614		57921*0.80*5/6
	Discount on bond liability		5281	7921*0.80*5/6
	Interest Liabilty		33333
01-02-2019	Interest liability	33333		57921*0.80*1/6
	Interest expense	7723
	Discount on bond liability		1056	7921*0.80*1/6
	Cash		40000	50000*0.8
* Loss on redeemption
Reacquiring price		214667	218000 - (200000 * 10% * 2/12)
Value at Par	200000
Unamortized discount	6402	193598
Loss on redeemption		21069