Accumulated Depreciation-Equipment Accumulated Depreciation-Machinery Allowance

Question

Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Allowance for Doubtful Accounts
Bad Debt Expense
Bond Issue Expense
Bonds Payable
Buildings
Cash
Common Stock
Debt Investments
Depreciation Expense
Discount on Bonds Payable
Discount on Notes Payable
Discount on Notes Receivable
Equipment
Equity Investments
Gain on Disposal of Machinery
Gain on Disposal of Land
Gain on Disposal of Plant Assets
Gain on Redemption of Bonds
Gain on Restructuring of Debt
Gain on Sale of Machinery
Interest Expense
Interest Payable
Interest Receivable
Interest Revenue
Land
Loss on Disposal of Land
Loss on Redemption of Bonds
Machinery
Mortgage Payable
No Entry
Notes Payable
Notes Receivable
Paid-in Capital in Excess of Par - Common Stock
Paid-in Capital in Excess of Par - Preferred Stock
Premium on Bonds Payable
Sales Revenue
Unamortized Bond Issue Costs
Unearned Revenue
Unearned Sales Revenue
Unrealized Holding Gain or Loss - Income Stellar Co. sells $403,000 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, Stellar buys back $132,990 worth of bonds for $138,990 (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 Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds Date 12/1/18 12/1/19 6/1/20 12/1/20 6/1/21 Difference due to rounding

Explanation / Answer

MATURITY VALUE OF BONDS PAYABLE $403,000

PRESENT VALUE OF $403,000 DUE IN 8 PERIODS AT 5% $272,766

PRESENT VALUE OF $24,180 SEMI ANNUAL INTEREST $156,280

PROCEEDS FROM SALE OF BOND $429,046

PREMIUM ON ISSUE OF BONDS(429046-403000) $26,046

JOURNAL:

Reacquisition price ($138,990 – $132,990 X 12% X 4/12)= $133,670

Net carrying amount of bonds redeemed:

Par value $132,990

Unamortized premium

[1/3 X ($26,046 – $2,728 – $2,864) – $668] 6,150 (139,140)

Gain on redemption $(5,470)

SCHEDULE OF BOND AMMORTIZATION EFFECTIVE INTEREST METHOD 12% BONDS SOLD TO YIELD 10% DATE CASH PAID INTEREST EXPENSE DISCOUNT AMMORTIZED CARRYING AMOUNT OF BONDS 06/01/17 $429,046 12/01/17 $24,180 21,452 2728 $426,318 06/01/18 $24,180 21,316 2864 $423,454 12/01/18 $24,180 21,173 3007 $420,447 06/01/19 $24,180 21,022 3158 $417,289 12/01/19 $24,180 20,864 3316 $413,973 06/01/20 $24,180 20,699 3481 $410,492 12/01/20 $24,180 20,525 3655 $406,837 06/01/21 $24,180 20,343 3837 $403,000

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