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
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 |
Related questions
Effective Interest Premium Amortization
Polk Incorporated issued $130,000 of 13% bonds on July 1, 2013,for $134,421.04. 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.
Required:
Prepare the journal entries to record the issue of the bonds onJuly 1, 2013, and the interest payments on December 31, 2013, andJune 30, 2014. If an amount box does not require an entry, leave itblank. Round your answers to two decimal places, if necessary. |
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 |
A company issued 10%, 5-year bonds with a par value of$2,000,000 on January 1, 2014. Interest is to be paid semiannuallyeach June 30 and December 31. The bonds were sold at $2,162,218based on an annual market rate of 8%. The company uses theeffective interest method of amortization.
(1) Complete the following amortization table for the semiannualpayment periods using the format shown below (round to the nearestdollar).
Semiannual Interest Period | Interest Paid | Interest Expense | Premium Amortization | Unamortized Premium | Carrying Value |
01/01/2014 | N/A | N/A | N/A | $162,218 | |
06/30/2014 | |||||
12/31/2014 | |||||
06/30/2015 |
