In: Accounting
Brief Exercise 14-8
Teton Corporation issued $731,000 of 7% bonds on November 1,
2014, for $776,913. The bonds were dated November 1, 2014, and
mature in 8 years, with interest payable each May 1 and November 1.
Teton uses the effective-interest method with an effective rate of
6%.
Prepare Teton’s December 31, 2014, adjusting entry
Semiannual Interest Period End |
Cash Interest paid $ |
Bond Interest Expense $ |
Premium Amortisation$ |
Unamortised Premium $ |
Carrying Value$ |
Date |
A=731000 x 3.5% |
B=Ex3% |
C=A – B |
D= D - C |
E = E - C |
01-11-2014 |
45913.00 |
776913.00 |
|||
01-05-2015 |
25585.00 |
23307.39 |
2277.61 |
43635.39 |
774635.39 |
01-11-2015 |
25585.00 |
23239.06 |
2345.94 |
41289.45 |
772289.45 |
01-05-2016 |
25585.00 |
23168.68 |
2416.32 |
38873.14 |
769873.14 |
01-11-2016 |
25585.00 |
23096.19 |
2488.81 |
36384.33 |
767384.33 |
01-05-2017 |
25585.00 |
23021.53 |
2563.47 |
33820.86 |
764820.86 |
01-11-2017 |
25585.00 |
22944.63 |
2640.37 |
31180.48 |
762180.48 |
01-05-2018 |
25585.00 |
22865.41 |
2719.59 |
28460.90 |
759460.90 |
01-11-2018 |
25585.00 |
22783.83 |
2801.17 |
25659.73 |
756659.73 |
01-05-2019 |
25585.00 |
22699.79 |
2885.21 |
22774.52 |
753774.52 |
01-11-2019 |
25585.00 |
22613.24 |
2971.76 |
19802.75 |
750802.75 |
01-05-2020 |
25585.00 |
22524.08 |
3060.92 |
16741.84 |
747741.84 |
01-11-2020 |
25585.00 |
22432.26 |
3152.74 |
13589.09 |
744589.09 |
01-05-2021 |
25585.00 |
22337.67 |
3247.33 |
10341.76 |
741341.76 |
01-11-2021 |
25585.00 |
22240.25 |
3344.75 |
6997.02 |
737997.02 |
01-05-2022 |
25585.00 |
22139.91 |
3445.09 |
3551.93 |
734551.93 |
01-11-2022 |
25585.00 |
22036.56 |
3548.44 |
3.49 |
731003.49 |
Date |
General Journal |
Dr (in $) |
Cr (in $) |
Working |
01-11-2014 |
cash |
776913 |
||
bonds payable |
731000 |
|||
premium |
45913 |
|||
(Bonds issued at premium) |
||||
30-11-2014 |
Interest expense |
3885 |
6 months interest = 23307 |
|
Interest payable |
3885 |
1 month = 23307/6 |
||
(Interest due and expense for Nov recorded) |
||||
30-11-2014 |
Premium |
380 |
6 months premium amortised = 2278 |
|
interest expense |
380 |
1 month amortised = 2278/6 |
||
(premium for Nov amortised) |