Cole Corporation issued $458,000, 6%, 21-year bonds on January 1, 2014, for $408
ID: 2490611 • Letter: C
Question
Cole Corporation issued $458,000, 6%, 21-year bonds on January 1, 2014, for $408,372. This price resulted in an effective-interest rate of 7% on the bonds. Interest is payable annually on January 1. Cole uses the effective-interest method to amortize bond premium or discount. 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.) Interest Periods Interest to Be Paid Interest Expense to Be Recorded Discount Amortization Unamortized Discount Bond Carrying Value Issue date $ $ $ $ $ 1 2 Show List of Accounts Link to Text 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.) Date Account Titles and Explanation Debit Credit Jan. 1, 2014 Show List of Accounts Link to Text 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.) Date Account Titles and Explanation Debit Credit Dec. 31, 2014 Show List of Accounts Link to Text Link to Text 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.) Date Account Titles and Explanation Debit Credit Jan. 1, 2015
Explanation / Answer
Cole Corporation Details Amt $ Bond Par value 458,000 Bond Issue Price 408,372 Bond discount 49,628 Annual interest @6% 27,480.00 Amortization schedule Years Interest Paid Interest expense @7% on carrying Amt Discount Amortized Unamortized discount Bond Payable Carrying Value of Bond Year 2014 49,628.00 458,000 408,372 Year 2015 27,480 28,586.04 1,106 48,521.96 458,000 409,478 Year 2016 27,480 28,663.46 1,183 47,338.50 458,000 410,662 Year 2017 27,480 28,746.31 1,266 46,072.19 458,000 411,928 Year 2018 27,480 28,834.95 1,355 44,717.25 458,000 413,283 Year 2019 27,480 28,929.79 1,450 43,267.45 458,000 414,733 Year 2020 27,480 29,031.28 1,551 41,716.17 458,000 416,284 Year 2021 27,480 29,139.87 1,660 40,056.31 458,000 417,944 Year 2022 27,480 29,256.06 1,776 38,280.25 458,000 419,720 Year 2023 27,480 29,380.38 1,900 36,379.87 458,000 421,620 Year 2024 27,480 29,513.41 2,033 34,346.46 458,000 423,654 Year 2025 27,480 29,655.75 2,176 32,170.71 458,000 425,829 Year 2026 27,480 29,808.05 2,328 29,842.66 458,000 428,157 Year 2027 27,480 29,971.01 2,491 27,351.64 458,000 430,648 Year 2028 27,480 30,145.38 2,665 24,686.26 458,000 433,314 Year 2029 27,480 30,331.96 2,852 21,834.30 458,000 436,166 Year 2030 27,480 30,531.60 3,052 18,782.70 458,000 439,217 Year 2031 27,480 30,745.21 3,265 15,517.49 458,000 442,483 Year 2032 27,480 30,973.78 3,494 12,023.71 458,000 445,976 Year 2033 27,480 31,218.34 3,738 8,285.37 458,000 449,715 Year 2034 27,480 31,480.02 4,000 4,285.35 458,000 453,715 Year 2035 27,480 31,760.03 4,285 0.35 458,000 458,000 Journal entries Date Account Title Dr $ Cr $ Jan 1.2014. Cash 408,372 Bond Payable 458,000 Discount on Bond Payable 49,628 ( recording issue of bond) Dec 31.2014. Interest Expense 28,586 Interest Payable 27,480 Discount on Bond Payable 1,106 ( recording interest expense 1st year) Jan 1.2015. Interest Payable 27,480 Cash 27,480