Question

On January 1, 2020, Larkspur Inc. sold 14% bonds having a maturity value of $710,000 for $761,190, which provides the bondholders with a 12% yield. The bonds are dated January 1, 2020, and mature on January 1, 2025, with interest payable on January 1 of each year. The company follows IFRS and uses the effective interest method.

Prepare the journal entry at the date of issue. (Round answers to 0 decimal places, e.g. 5,255. Credit account titles are automatically indented when the 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 for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount

  

  

Prepare a schedule of interest expense and bond amortization for 2020 through 2023. (Round answers to 0 decimal places, e.g. 5,275.)

Schedule of Interest Expense and Bond Premium Amortization Effective Interest Method
Date		Credit Cash		Debit Interest Expense		Debit Bonds Payable		Carrying Amount of Bonds
1/1/20								$enter a dollar amount
1/1/21		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		enter a dollar amount
1/1/22		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/23		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount

  

  

Prepare the journal entries to record the interest payment and the amortization for 2020. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the 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 for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
Jan. 1, 2021	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount

  

  

Prepare the journal entries to record the interest payment and the amortization for 2022. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the 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, 2022	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
Jan. 1, 2023	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount

Answer 1

Answer -

Journal Entry for The Issuance of Bond:

Date	Account Title & Explanation	Debit($)	Credit($)
Jan.1,2020	Cash A/c	761,190
	12% Bonds Payable A/c		710,000
	Premium on Bonds Payable A/c		51,190
	(Issue of Bond at Premium )

b.

Date	Cash Paid($)	Interest Expense($)	Premium Amortized($)	Carrying Amt
1/1/20	-	-	-	761,190
1/1/21	99,400	91,343	(8,057)	753,133
1/1/22	99,400	90,376	(9,024)	744,109
1/1/23	99,400	89,293	(10,107)	734,002

Interest will be calculated at 12% on Carrying Value.

c. Journal Entry for Interest Payment and Amortization in 2020:

Date	Account Title and Explanation	Debit($)	Credit($)
01/01/21	Interest Expenses A/c	$91,343
	Premium on Bonds Payable A/c	$8057
	Cash A/c		$99,400
	(Payment of Interest and Amortization of Pre.)
d.	Journal Entry for 2022
01/01/22	Interest Expenses A/c	$90376
	Premium on Bonds Payable A/c	$9024
	Cash A/c		$99,400
	(Payment of Interest and Amortization of Pre.)

01/01/23	Interest Expenses A/c	$89,293
	Premium on Bonds Payable A/c	$10107
	Cash A/c		$99,400
	(Payment of Interest and Amortization of Pre.)