Question

On January 1, 2017, Carla Company sold 11% bonds having a maturity value of $480,000 for $537,493, which provides the bondholders with a 8% yield. The bonds are dated January 1, 2017, and mature January 1, 2022, with interest payable December 31 of each year. Carla Company allocates interest and unamortized discount or premium on the effective-interest basis.

  
Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
January 1, 2017

SHOW LIST OF ACCOUNTS
LINK TO TEXT

  
Prepare a schedule of interest expense and bond amortization for 2017–2019. (Round answer to 0 decimal places, e.g. 38,548.)

Schedule of Interest Expense and Bond Premium Amortization
Effective-Interest Method

Date
Cash
Paid
Interest
Expense
Premium
Amortized
Carrying
Amount of Bonds
1/1/17       $
$
$
$
12/31/17      

12/31/18      

12/31/19      

SHOW LIST OF ACCOUNTS
LINK TO TEXT

  
Prepare the journal entry to record the interest payment and the amortization for 2017. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
December 31, 2017

SHOW LIST OF ACCOUNTS
LINK TO TEXT

  
Prepare the journal entry to record the interest payment and the amortization for 2019. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
December 31, 2019

On January 1, 2017, Carla Company sold 11% bonds having a maturity value of $480,000 for $537,493, which provides the bondholders with a 8% yield. The bonds are dated January 1, 2017, and mature January 1, 2022, with interest payable December 31 of each year. Carla Company allocates interest and unamortized discount or premium on the effective-interest basis.

Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
January 1, 2017

SHOW LIST OF ACCOUNTS
LINK TO TEXT

Prepare a schedule of interest expense and bond amortization for 2017–2019. (Round answer to 0 decimal places, e.g. 38,548.)

Schedule of Interest Expense and Bond Premium Amortization
Effective-Interest Method
Date
Cash
Paid
Interest
Expense
Premium
Amortized
Carrying
Amount of Bonds
1/1/17 $
$
$
$
12/31/17
12/31/18
12/31/19

SHOW LIST OF ACCOUNTS
LINK TO TEXT

Prepare the journal entry to record the interest payment and the amortization for 2017. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
December 31, 2017

SHOW LIST OF ACCOUNTS
LINK TO TEXT

Prepare the journal entry to record the interest payment and the amortization for 2019. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
December 31, 2019

Answer 1

Solution:

Part 1 --- the journal entry at the date of the bond issuance

Date	Account Titles and Explanation	Debit	Credit
Jan.1, 2017	Cash	$537,493
	Bonds Payable (Face Value)		$480,000
	Premium on Bonds Payable (Bal. fig)		$57,493
	(Bonds are issued at premium recorded)

Part 2 -- schedule of interest expense and bond amortization for 2017–2019

Schedule of Amortization of Bond PREMIUM (Effective Rate Method)
	Date	Cash Paid (Face Value of the Bonds $480,000 x Coupon Rate 11%)	Interest Expense (Carrying Value at the beginning of period x Market Interest Rate 8%)	Premium Amortization (Cash Paid - Interest Expense)	Carrying Amount of Bonds
	1/1/2017				$537,493
	12/31/2017	$52,800	$42,999	$9,801	$527,692 (537,493 – 9801)
	12/31/2018	$52,800	$42,215	$10,585	$517,108 (527692 – 10585)
	12/31/2019	$52,800	$41,369	$11,431	$505,676 (517108 – 11431)

Part 3 -- the journal entry to record the interest payment and the amortization for 2017

Date	Account Titles and Explanation	Debit	Credit
Dec.31, 2017	Interest Expense	$42,999
	Premium on Bonds Payable (Amortization)	$9,801
	Cash Interest		$52,800

Part 4 -- journal entry to record the interest payment and the amortization for 2019.

Date	Account Titles and Explanation	Debit	Credit
Dec.31, 2019	Interest Expense	$41,369
	Premium on Bonds Payable (Amortization)	$11,431
	Cash Interest		$52,800

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you