Cookie Dough Corporation issued $850,000 in 9%, 10-year bonds (payable on Decemb
ID: 2462337 • Letter: C
Question
Cookie Dough Corporation issued $850,000 in 9%, 10-year bonds (payable on December 31, 2024) on December 31, 2014, for $907,759. Interest is paid on June 30 and December 31. The market rate of interest is 8%.
A. Prepare the amortization table through December 31, 2017, using the effective interest rate method. If an amount box does not require an entry, leave it blank or enter "0". If required, round your answers to the nearest whole dollar.
B. Prepare the journal entries for December 31, 2016 and 2017. If an amount box does not require an entry, leave it blank. If required, round your answers to the nearest whole dollar.
Please show your work.
Explanation / Answer
A) Amortization schedule :
B)
A= (850000 * 4.5%) B= (carrying value *.04) (A-B) Period cash payment Interest expense Premium on bond payable Premium on bond payable balance carrying value At issue 907759-850000=57759 907759 6/30/2015 38250 [850000*.045] 36310.36 [907759*.04] 1939.64 [38250-36310.36] 57759-1939.64 = 55819.36 850000+55819.36 = 905819.36 12/31/2015 38250 36232.77 [905819.36*.04] 2017.23 [38250-36232.77] 55819.36-2017.23 = 53802.13 850000+53802.13= 903802.13 6/30/2016 38250 36152.09 2097.91 53802.13-2097.91= 51704.22 850000+51704.22= 901704.22 12/31/2016 38250 36068.17 2181.83 51704.22-2181.83= 49522.39 850000+49522.39= 899522.39 6/30/2017 38250 35980.90 2269.10 49522.39-2269.1= 47253.29 850000+47253.29= 897253.29 12/31/2017 38250 35890.13 2359.87 47253.29-2359.87= 44893.42 850000+44893.42= 894893.42