Question
In: Accounting
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 | |||||||
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