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Polk Incorporated issued $127,000 of 7% bonds on July 1, 2016, for $131,944.18. The bonds were...

Polk Incorporated issued $127,000 of 7% bonds on July 1, 2016, for $131,944.18. 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 6%. 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.

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Solutions

Expert Solution

Date Accounts title Dr Cr
july 1 2016 Cash 131944.18
Premium on Bonds payable 4944.18
Bond payble 127000
Dec 31 2016 Interest Expense 3958.33
Premium on Bonds payable 486.67
Cash 4445.00
June 30 2017 Interest Expense 3943.73
Premium on Bonds payable 501.27
Cash 4445.00
Amortization Schedule
A B C D E F G               $
Date Interest Payment @3.5% Interest expenses at 3%*G Amortization of Bond C-B cr, balance in the a/c Bond Premium a/c Credit balance in the Bond payable Carrying value of Bond F+E
Credit cash Debit Interest Expense Bond Premium
July 1 2016 4944.18 127000 131944.18
Dec,31 2016 4445 3958 487 4458 127000 131458
June 30,2017 4445 3944 501 3956 127000 130956
Dec,31 2017 4445 3929 516 3440 127000 130440
If any doubt please comment

ekkarill92 answered 2 years ago
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