14-1 The following amortization and interest schedule reflects the issuance of 11-year bonds by...

Question

14-1 The following amortization and interest

schedule reflects the issuance of 11-year bonds by Capulet Corporation on

January 1, 2008, and the subsequent interest payments and charges. The

companyâs year-end is December 31, and financial statements are prepared once

yearly.

Amortization Schedule

Year

Cash

Interest

Amount

Unamortized

Carrying

Value

1/1/2008

$41,640

$ 157,260

2008

$21,879

$23,589

39,930

158,970

2009

21,879

23,846

37,963

160,937

2010

21,879

24,141

35,701

163,199

2011

21,879

24,480

33,100

165,800

2012

21,879

24,870

30,109

168,791

2013

21,879

25,319

26,669

172,231

2014

21,879

25,835

22,713

176,187

2015

21,879

26,428

18,164

180,736

2016

21,879

27,110

12,933

185,967

2017

21,879

34,812

198,900

Instructions

(a)

Indicate whether the bonds were issued at

a premium or a discount.

(b)

Indicate whether the amortization

schedule is based on the straight-line method or the effective-interest

method.

(c)

Determine the stated interest rate and

the effective-interest rate. (Round answers to 0 decimal places, e.g.

38,548.)

(d)

On the basis of the schedule above,

prepare the journal entry to record the issuance of the bonds on January 1,

2008. (Round answers to 0 decimal places, e.g. 38,548.)

(e)

On the basis of the schedule above,

prepare the journal entry or entries to reflect the bond transactions and

accruals for 2008. (Interest is paid January 1.) (Round answers to 0

decimal places, e.g. 38,548.)

(f)

On the basis of the schedule above,

prepare the journal entry or entries to reflect the bond transactions and

accruals for 2015. Capulet Corporation does not use reversing entries. (Round

answers to 0 decimal places, e.g. 38,548.)

14-5

In each of the following independent cases

the company closes its books on December 31.

Sanford Co. sells $510,200 of 8%

bonds on March 1, 2014. The bonds pay interest on September 1 and March 1. The

due date of the bonds is September 1, 2017. The bonds yield 12%.

Prepare a bond amortization schedule using the effective-interest method for

discount and premium amortization. Amortize premium or discount on interest

dates and at year-end.(Round answers to 0 decimal places, e.g. 38,548.)

Schedule of Bond Discount

Amortization

Effective-Interest Method

Bonds Sold to Yield

Date

Cash

Paid

Interest

Expense

Discount

Amortized

Carrying

Amount of

Bonds

3/1/14

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9/1/14

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3/1/15

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9/1/15

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3/1/16

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9/1/16

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3/1/17

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9/1/17

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*

* Difference due to rounding

Prepare all of the relevant journal entries from

the time of sale until the date indicated. (Assume that no reversing entries

were made.)(Round

answers to 0 decimal places, e.g. 38,548. If no entry is required, select

“No Entry” for the account titles and enter 0 for the amounts. Credit

account titles are automatically indented when amount is entered. Do not indent

manually.)

Date

Account Titles and Explanation

Debit

Credit

3/1/14

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9/1/14

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12/31/14

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3/1/15

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9/1/15

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12/31/15

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2.

Titania Co. sells $400,000 of 12% bonds

on June 1, 2014. The bonds pay interest on December 1 and June 1. The due

date of the bonds is June 1, 2018. The bonds yield 10%. On October 1, 2015,

Titania buys back $120,000 worth of bonds for $126,000 (includes accrued

interest). Give entries through December 1, 2016.

Instructions

Prepare all of the relevant journal entries

from the time of sale until the date indicated. Use the effective-interest

method for discount and premium amortization (construct amortization tables

where applicable). Amortize premium or discount on interest dates and at

year-end. (Assume that no reversing entries were made.)

14-1 The following amortization and interest schedule reflects the issuance of 11-year bonds by Capulet Corporation on January 1, 2008, and the subsequent interest payments and charges. The...

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