Polk Incorporated issued $200,000 of 13% bonds on July 1, 2016, for $206,801.60. The bonds were...

Polk Incorporated issued $200,000 of 13% bonds on July 1, 2016, for $206,801.60. The bonds were dated January 1, 2016, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 12%. Polk uses the effective interest method of amortization.

Required:

Prepare the journal entries to record the issue of the bonds on July 1, 2016, and the interest payments on December 31, 2016, and June 30, 2017. In addition, prepare a bond interest expense and premium amortization schedule for the bonds through June 30, 2017.

Expert Solution

						Entries
Semi-nnual Interest periods	Interest @ 6%	Interest @ 6.5%	Premium Amortization	Unamortized Premium	Bond carrying value (bond par value- discount)	7/1/2016	Cash	$ 206,801.60
Issue Date				$ 6,802	$ 206,802		Premium on Bonds		$ 6,801.60
31-Dec	$ 12,408.10	$ 13,000.00	$ 592	$ 6,210	$ 206,210		Bonds payable		$ 200,000.00
1-Jul	$ 12,372.58	$ 13,000.00	$ 627	$ 5,582	$ 205,582	12/31/2016	Interest expenses	$ 12,408.10
31-Dec	$ 12,334.94	$ 13,000.00	$ 665	$ 4,917	$ 204,917		Premium on Bonds	$ 591.90
1-Jul	$ 12,295.03	$ 13,000.00	$ 705	$ 4,212	$ 204,212		Cash		$ 13,000.00
31-Dec	$ 12,252.73	$ 13,000.00	$ 747	$ 3,465	$ 203,465	6/30/2017	Interest expenses	$ 12,372.58
1-Jul	$ 12,207.90	$ 13,000.00	$ 792	$ 2,673	$ 202,673		Premium on Bonds	$ 627.42
31-Dec	$ 12,160.37	$ 13,000.00	$ 840	$ 1,833	$ 201,833		Cash		$ 13,000.00
1-Jul	$ 12,110.00	$ 13,000.00	$ 890	$ 943	$ 200,943
31-Dec	$ 12,056.59	$ 13,000.00	$ 943	$ (0)	$ 200,000

ekkarill92 answered 1 year ago

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