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 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. |
Related questions
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 |
Held-to-Maturity Securities and Amortization of a Discount
On January 1, 2013, Kelly Corporation acquired bonds with a facevalue of $500,000 for $483,841.79, a price that yields a 10%effective annual interest rate. The bonds carry a 9% stated rate ofinterest, pay interest semiannually on June 30 and December 31, aredue December 31, 2016, and are being held to maturity.
Prepare journal entries to record the purchase of the bonds andthe first two interest receipts using the straight-line method ofamortization. If required, round your answers to the nearest cent.For compound entries, if an amount box does not require an entry,leave it blank.
| 2013 | investment in held-to-maturity debt securities | $????? | |
| Jan 1 | cash | $????? | |
| June 30 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? | ||
| Dec 31 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? |
Prepare journal entries to record the purchase of the bonds andthe first two interest receipts using the effective interest methodof amortization. If required, round your answers to the nearestcent. For compound entries, if an amount box does not require anentry, leave it blank.
| 2013 | investment in held-to-maturity debt securities | $????? | |
| Jan 1 | cash | $????? | |
| June 30 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? | ||
| Dec 31 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? |
The Gorman Group issued $920,000 of 9% bonds on June 30, 2016,for $1,011,047. The bonds were dated on June 30 and mature on June30, 2036 (20 years). The market yield for bonds of similar risk andmaturity is 8%. Interest is paid semiannually on December 31 andJune 30.
| Required: |
| Complete the below table to record the company's journal entry.(Enter interest rate to 1 decimal place. (i.e. 0.123 shouldbe entered as 12.3).)
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