Submitted by: Submitted by vahid23
Views: 161
Words: 351
Pages: 2
Category: Business and Industry
Date Submitted: 01/20/2013 08:25 PM
*PROBLEM 16-5B | |
On July 1, 2005, Clintin Corporation issued $4,000,000 face value, 10%, 10-year bonds at $4,543,626. This price resulted in an effective-interest rate of 8% on the bonds. Clintin uses the effective-interest method to amortize bond premium and discount. The bonds pay semiannual interest July 1, and January 1.
a-) Prepare the journal entry to record the issuance of the bonds
on July 1, 2005.
b-) Prepare the journal entry to record the accrual interest and
the amortization of the premium on December 31, 2005.
c-) Prepare the journal entry to record the payment of interest
and the amortization of the premium on July1, 2006,
assuming no accrual of interest on July 30.
d-) Prepare the journal entry to record the accrual interest and
the amortization of the premium on December 31, 2006.
e-) Prepare the amortization table through December 31, 2006.
(3 interest periods) for this bond issue.
(a) 2005
July 1 Cash 4,543,626
Bonds Payable 4,000,000
Premium on Bonds
Payable 543,626
(b) Dec. 31 Bond Interest Expense 181,745
($4,543,626 X 4%)
Premium on Bonds Payable 18,255
Bond Interest Payable 200,000
($4,000,000 X 5%)
(c) 2006
July 1 Bond Interest Expense 181,015
[($4,543,626 – $18,255) X 4%]
Premium on Bonds Payable 18,985
Cash 200,000
(d) Dec. 31 Bond Interest Expense 180,255
[($4,525,371 – $18,985) X 4%]
Premium on Bonds Payable 19,745
Bond Interest Payable 200,000
(e) CLINTIN CORPORATION
Bond Premium Amortization
Effective-Interest Method—Semiannual Interest Payments
10% Bonds Issued at 8%
| | |(A) | |(B) | |(C) | |(D) | |(E) |
|Semi- | | | | | |Premium | |Unamor- | |Bond...