Problem 14-1 Amortization Schedule Year Cash Interest Amount Unamortized Carryin
ID: 2581288 • Letter: P
Question
Problem 14-1
Amortization Schedule
Year
Cash
Interest
Amount
Unamortized
Carrying
Value
Date
Account Titles and Explanation
Debit
Credit
January 1, 2011
Date
Account Titles and Explanation
Debit
Credit
December 31, 2011
Date
Account Titles and Explanation
Debit
Credit
Problem 14-1
Your answer is partially correct. Try again. The following amortization and interest schedule reflects the issuance of 10-year bonds by Monty Corporation on January 1, 2011, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.Amortization Schedule
Year
Cash
Interest
Amount
Unamortized
Carrying
Value
(a) Indicate whether the bonds were issued at a premium or a discount.
DiscountPremium
(b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method.
Effective interest methodStraight-line method
(c) Determine the stated interest rate and the effective-interest rate. (Round answers to 0 decimal places, e.g. 18%.)
The stated rate % The effective rate %
(d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2011. (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
January 1, 2011
(e) On the basis of the schedule above, prepare the journal entry to reflect the bond transactions and accruals for 2011. (Interest is paid January 1.) (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
December 31, 2011
(f) On the basis of the schedule above, prepare the journal entries to reflect the bond transactions and accruals for 2018. Monty Corporation does not use reversing entries. (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
January 1, 2018December 31, 2018
January 1, 2018December 31, 2018
Explanation / Answer
Answer a Bonds were issued at discount. Answer b The amortization schedule is based on the effective interest method. Answer c Stated Interest rate = (Yearly Cash Payment / Bond par value ) * 100 = ($21010/$210100)*100 = 10% The effective Rate = [Interest expense for 2011 / Beginning Carrying value of bond 2011]*100 = [$23607 / $157377]*100 = 15% Answer d Journal entry to record the issuance of the bonds on January 1, 2011 Date Account Titles and Explanation Debit Credit Jan.1,2011 Cash $157,377 Discount on Bonds Payable $52,723 Bonds Payable $210,100 Answer e Journal entry to record the interest accrual on Dec.31,2011 Date Account Titles and Explanation Debit Credit Dec.31,2011 Interest Expense $23,607 Discount on Bonds Payable $2,597 Interest Payable $21,010 Answer f Journal entry to record the bond transactions for 2018 Date Account Titles and Explanation Debit Credit January 1,2018 Interest Payable $21,010 Cash $21,010 Dec.31,2018 Interest Expense $27,917 Discount on Bonds Payable $6,907 Interest Payable $21,010