Question

On January 1, 2020, Indigo Company purchased 12% bonds having a maturity value of $310,000, for $333,502.59. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Indigo Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Prepare the journal entry at the date of the bond purchase. (Enter answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1, 2020	enter an account title to record the transaction on January 1, 2020	enter a debit amount	enter a credit amount

Prepare a bond amortization schedule. (Round answers to 2 decimal places, e.g. 2,525.25.)

Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method
Date		Cash Received		Interest Revenue		Premium Amortized		Carrying Amount of Bonds
1/1/20		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places
1/1/21		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
1/1/22		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
1/1/23		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
1/1/24		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020	enter an account title to record the transaction on December 31, 2020	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2020	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2020	enter a debit amount	enter a credit amount

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2021	enter an account title to record the transaction on December 31, 2021	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2021	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2021	enter a debit amount

Answer 1

Amortization table
	Col I	Col II	Col III	Col IV	Col V
Date	Interest Payment($310,000*12%)	Interest expenses(Col IV*10%)	Premium amorrtization(Col I -Col II)	Unamortized Premium	Bond carrying amount
01-Jan-20				23,503	3,33,503
01-Jan-21	37,200	33,350	3,850	19,653	3,29,653
01-Jan-22	37,200	32,965	4,235	15,418	3,25,418
01-Jan-23	37,200	32,542	4,658	10,760	3,20,760
01-Jan-24	37,200	32,076	5,124	5,636	3,15,636
01-Jan-24	37,200	31,564	5,636	(0)	3,10,000
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-20	Cash	$3,33,503
		Bonds Payable		$3,10,000
		Premium on Bonds Payable		$23,503
	31-Dec-20	Interest expenses	33,350
		Premium on Bonds Payable	3,850
		Cash		37,200
	31-Dec-21	Interest expenses	32,965
		Premium on Bonds Payable	4,235
		Cash		37,200