Question & Answer: Buffalo Co. sells $495,000 of 10% bonds on March 1, 2017. The bonds pay interest on September 1 and March 1. The due date of the bon…..

Buffalo Co. sells $495,000 of 10% bonds on March 1, 2017. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2020. 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.)

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Schedule of Bond Discount Amortization
Effective-Interest Method
Bonds Sold to Yield

Date
Cash
Paid
Interest
Expense
Discount
Amortized
Carrying
Amount of
Bonds
3/1/17 $
$
$
$
9/1/17
3/1/18
9/1/18
3/1/19
9/1/19
3/1/20
9/1/20

Prepare all of the relevant journal entries from the time of sale until the date indicated. (Assume that no reversing entries were made.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. 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
3/1/17

3/1/17
9/1/17
12/31/17
3/1/18
9/1/18
12/31/18

3/1/17
9/1/17
12/31/17
3/1/18
9/1/18
12/31/18
3/1/18

3/1/17
9/1/17
12/31/17
3/1/18
9/1/18
12/31/18

3/1/17
9/1/17
12/31/17
3/1/18
9/1/18
12/31/18

SHOW LIST OF ACCOUNTS
LINK TO TEXT
LINK TO TEXT
LINK TO TEXT

Carla Co. sells $430,000 of 12% bonds on June 1, 2017. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2021. The bonds yield 10%. On October 1, 2018, Carla buys back $141,900 worth of bonds for $149,900 (includes accrued interest).

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
6/1/17 $
$
$
$
12/1/17
6/1/18
12/1/18
6/1/19
12/1/19
6/1/20
12/1/20
6/1/21

* Difference due to rounding

Prepare all of the relevant journal entries from the time of sale until the date indicated. Give entries through December 1, 2019. (Assume that no reversing entries were made.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. 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
6/1/17
12/1/17
12/31/17
6/1/18
10/1/18
(To record interest expense and premium amortization)
10/1/18
(To record buy back of bonds)
12/1/18
12/31/18
6/1/19
12/1/19

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