Effective Interest Discount Amortization
Chowan Corporation issued $190,000 of 10% bonds dated January 1,2013, for $183,982.19 on Janauary 1, 2013. The bonds are dueDecember 31, 2016, were issued to yield 11%, and pay interestsemiannually on June 30 and December 31. Chowan uses the effectiveinterest method of amortization.
In addition, prepare a bond interest expense and discountamortization schedule for the bonds through June 30, 2014.
Chowan Corporation
Bond Interest Expense and Discount Amortization Schedule(Partial)
Effective Interest Method
10% Bonds Sold to Yield 11%
Date Cash Interest Expense Unmortized Discount Book Value of Bonds Credit Debit Credit 01/01/13 $183,982.19 06/30/13 $9,500 $10,119.02 $619.02 $????? 12/31/13 $9,500 $10,153.07 $653.07 $185,254.28 06/30/14 $9,500 $10,188.99 $688.99 $185,943.27
Effective Interest Discount Amortization
Chowan Corporation issued $190,000 of 10% bonds dated January 1,2013, for $183,982.19 on Janauary 1, 2013. The bonds are dueDecember 31, 2016, were issued to yield 11%, and pay interestsemiannually on June 30 and December 31. Chowan uses the effectiveinterest method of amortization.
In addition, prepare a bond interest expense and discountamortization schedule for the bonds through June 30, 2014.
Chowan Corporation
Bond Interest Expense and Discount Amortization Schedule(Partial)
Effective Interest Method
10% Bonds Sold to Yield 11%
| Date | Cash | Interest Expense | Unmortized Discount | Book Value of Bonds |
| Credit | Debit | Credit | ||
| 01/01/13 | $183,982.19 | |||
| 06/30/13 | $9,500 | $10,119.02 | $619.02 | $????? |
| 12/31/13 | $9,500 | $10,153.07 | $653.07 | $185,254.28 |
| 06/30/14 | $9,500 | $10,188.99 | $688.99 | $185,943.27 |
Related questions
Chowan Corporation issued $115,000 of 9% bonds dated January 1,2016, for $111,283.65 on January 1, 2016. The bonds are dueDecember 31, 2019, were issued to yield 10%, and pay interestsemiannually on June 30 and December 31. Chowan uses the effectiveinterest method of amortization.
Required:
| Prepare the journal entries torecord the issue of the bonds on January 1, 2016, and the interestpayments on June 30, 2016, December 31, 2016, and June 30, 2017. Inaddition, prepare a bond interest expense and discount amortizationschedule for the bonds through June 30, 2017. |
Effective Interest Premium Amortization
Polk Incorporated issued $440,000 of 13% bonds on July 1, 2013,for $454,963.51. The bonds were dated January 1, 2013, pay intereston each June 30 and December 31, are due December 31, 2017, andwere issued to yield 12%. Polk uses the effective interest methodof amortization.
In addition, prepare a bond interest expense and premiumamortization schedule for the bonds through June 30, 2014.
Polk incorporated
Bond interest Expense and Premium Amortization Schedule(Partial)
Effective Interest Method
13% Bonds Sold to Yield 12%
| Date | Cash Credit | Interest Expense Debit | Unamortized Premium Debit | Book Value of Bonds |
| 07/01/13 | $454,963.51 | |||
| 12/31/13 | $28,600 | $27,297.81 | $1,302.19 | $????? |
| 06/30/14 | $28,600 | $27,219.68 | $1,380.32 | $452,281 |
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. | | ||
