Problem 1
On July 1, 2014, Flanagin Corporation issued $1,649,500, 10%, 10-year bonds at $1,873,678. This price resulted in an effective-interest rate of 8% on the bonds. Flanagin uses the effective-Interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.
| Date |
Account Titles and Explanation |
Debit |
Credit |
| July 1, 14 |
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Prepare the journal entry to record the issuance of the bonds on July 1, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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FLANAGIN CORPORATION
Bond Premium Amortization
Effective-Interest Method-Semiannual Interest Payments
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| Semiannual Interest Periods |
Interest to be Paid |
Interest Expense |
Premium Amortization |
Unamortized Premium |
Bond Carrying Value |
| Issue Date |
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| 1 |
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Prepare an amortization table through December 31, 2015 (3 Interest periods), for this bond Issue. (Round answers to 0 decimal places, e.g. 15,250.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
| Dec. 31, 2014 |
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Prepare the journal entry to record the accrual of Interest and the amortization of the premium on December 31, 2014. (Round answers to 0 decimal places, a p. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
| July 1, 15 |
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Prepare the journal entry to record the accrual of Interest and the amortization of the premium on December 31, 2015. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
| Dec. 31, 2015 |
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Problem 2
On July 1, 2014, Kellerman Company issued $3,733,900, 8%, 10-year bonds at $3,268,575. This price resulted in an effective-Interest rate of 10% on the bonds. Kellerman uses the effective-Interest method to amortize bond premium or discount. The pones pay semiannual interest July 1 and January 1.
Your answer is partially correct. Try again.
Prepare the journal entries to record the following transactions. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered, Do not indent manually.)
(1) The Issuance of the bonds on July 1, 2014.
(2) The accrual of Interest and the amortization of the discount on December 31, 2014.
(3) The payment of Interest and the amortization of the discount on July 1, 2015, assuming no accrual of Interest on June 30.
(4) The accrual of Interest and the amortization of the discount on December 31, 2015.
| No. |
Date |
Account Titles and Explanation |
Debit |
Credit |
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July 1, 14 |
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| 2 |
Dec. 31, 2014 |
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July 1, 15 |
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| 4 |
Dec. 31, 2015 |
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Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2015, balance sheet. (For Bonds Payable, Notes Payable and Mortgage payable enter the account name only and do not provide any additional descriptive information e.g. due 2024.)
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Kellerman Company
Balance Sheet
31-Dec-15
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