Chekhov Company sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below.
Period Cash
Payment
(Credit) Interest
Expense
(Debit) Discount
on Bonds
Payable
(Credit) Discount
on Bonds
Payable Balance
(Debit) Bond Payable
Carrying Value
(Credit) At issue $8,000 $192,000 6/30/2019 $12,000 $12,800 $800 7,200 $192,800 12/31/2019 12,000 12,800 800 6,400 193,600 6/30/2020 ? ? ? ? ?
Required:
1. Determine the stated interest rate on these bonds.
%
Chekhov Company sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below.
| Period | Cash Payment (Credit) | Interest Expense (Debit) | Discount on Bonds Payable (Credit) | Discount on Bonds Payable Balance (Debit) | Bond Payable Carrying Value (Credit) |
| At issue | $8,000 | $192,000 | |||
| 6/30/2019 | $12,000 | $12,800 | $800 | 7,200 | $192,800 |
| 12/31/2019 | 12,000 | 12,800 | 800 | 6,400 | 193,600 |
| 6/30/2020 | ? | ? | ? | ? | ? |
Required:
1. Determine the stated interest rate on these bonds.
%
Related questions
MacBride Enterprises sold $200,000 of bonds on December 31, 2018. A portion of the amortization table appears below.
| Period | Cash Payment (Credit) | Interest Expense (Debit) | Premium on Bonds Payable (Debit) | Premium on Bonds Payable Balance (Credit) | Bond Payable Carrying Value (Credit) | |||||
| At issue | $6,457 | $206,457 | ||||||||
| 06/30/19 | $9,000 | $8,465 | $535 | 5,922 | 205,922 | |||||
| 12/31/19 | 9,000 | 8,443 | 557 | 5,365 | 205,365 | |||||
| 06/30/20 | 9,000 | 8,420 | 580 | 4,785 | 204,785 | |||||
| 12/31/20 | ? | ? | ? | ? | ? | |||||
Required:
1. Indicate the stated annual interest rate on these bonds.
%
2. Calculate the effective annual interest rate on these bonds. (Note: Round to the nearest 0.1%.)
%
3. Determine the interest expense and premium amortization for the interest period ending December 31, 2020. (Note: Round to the nearest dollar.)
| Period | Cash Payment (Credit) | Interest Expense (Debit) | Premium on Bonds Payable (Debit) | Premium on Bonds Payable Balance (Credit) | Bond Payable Carrying Value (Credit) | ||||||||||||||||||||
| At issue | $6,457 | $206,457 | |||||||||||||||||||||||
| 6/30/19 | $9,000 | $8,465 | $535 | 5,922 | 205,922 | ||||||||||||||||||||
| 12/31/19 | 9,000 | 8,443 | 557 | 5,365 | 205,365 | ||||||||||||||||||||
| 6/30/20 | 9,000 | 8,420 | 580 | 4,785 | 204,785 | ||||||||||||||||||||
| 12/31/20 | |||||||||||||||||||||||||
Bonds Payable Journal Entries; Effective Interest Amortization
On December 31, 2009, Blair Company issued $800,000 of 20-year, 11% bonds payable for $754,784, yielding an effective interest rate of 12%. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2010, and (c) the semiannual interest payment and discount amortization on December 31, 2010. Round amounts to the nearest dollar.
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| a.) | |||
| Dec.31 | Cash | $Answer | $Answer |
| Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer | |
| Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer | |
| To record issuance of bonds. | |||
| b. | |||
| Jun.30 | Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense. | Answer | Answer |
| Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense. | Answer | Answer | |
| Cash | Answer | Answer | |
| To record semiannual interest payment and | |||
| c.) | |||
| Dec.31 | Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer |
| Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer | |
| Cash | Answer | Answer | |
| To record semiannual interest payment. | | ||
