Cole Corporation issued $405,000, 7%, 22-year bonds on January 1, 2014, for $363
ID: 2451529 • Letter: C
Question
Cole Corporation issued $405,000, 7%, 22-year bonds on January 1, 2014, for $363,686. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Cole uses the effective-interest method to amortize bond premium or discount.
1. Prepare the schedule using effective-interest method to amortize bond premium or discount of Cole Corporation. (Round answers to 0 decimal places, e.g. 150.)
2. Prepare the journal entries to record the issuance of the bonds. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
3. Prepare the journal entries to record the accrual of interest and the discount amortization on December 31, 2014. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
4. Prepare the journal entries to record the payment of interest on January 1, 2015. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Explanation / Answer
Question 1 Beging Annual Annual Total Ending Year Discount Amortization nterest Interest Discount 1 41314 1878 28350 30228 39436 2 39436 1878 28350 30228 37558 3 37558 1878 28350 30228 35680 4 35680 1878 28350 30228 33802 5 33802 1878 28350 30228 31924 6 31924 1878 28350 30228 30047 7 30047 1878 28350 30228 28169 8 28169 1878 28350 30228 26291 9 26291 1878 28350 30228 24413 10 24413 1878 28350 30228 22535 11 22535 1878 28350 30228 20657 12 20657 1878 28350 30228 18779 13 18779 1878 28350 30228 16901 14 16901 1878 28350 30228 15023 15 15023 1878 28350 30228 13145 16 13145 1878 28350 30228 11267 17 11267 1878 28350 30228 9390 18 9390 1878 28350 30228 7512 19 7512 1878 28350 30228 5634 20 5634 1878 28350 30228 3756 21 3756 1878 28350 30228 1878 22 1878 1878 28350 30228 0 Question 2. Date Account Title Debit Credit 1-Jan-14 Cash 363686 Discount on Bond 41314 22 year 7% Bond 405000 (Issue of 7% Bond at discount) Question 3. 31-Dec-14 Interest Expenses 30228 Discount on Bond 1878 Interest Payable 28350 (Interest accrued and Discount amortized) Question 4. 1-Jan-15 Interest Payable 28350 Cash 28350