Please show your work to ensure accuracy! Thank you The following amortization a

Question

Please show your work to ensure accuracy! Thank you

The following amortization and interest schedule reflects the issuance of 10-year bonds by Ping Inc. 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.

List of Accounts to Choose From

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

Amortization Schedule Amount Unamortized Carrying Value Year Cash Interest $6,809 113,691 114,079 114,513 115,000 115,545 116,155 116,839 117,605 118,463 119,424 120,500 1/1/2011 2011 $13,255 2012 2013 2014 2015 2016 2017 2018 2019 2020 13,255 13,255 13,255 13,255 13,255 13,255 13,255 13,255 13,255 $13,643 13,689 13,742 13,800 13,865 13,939 14,021 14,113 14,216 14,331 6,421 5,987 5,500 4,955 4,345 3,661 2,895 2,037 1,076 (a) Indicate whether the bonds were issued at a premium or a discount. Discount (b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method Effective interest method

Explanation / Answer

Answer:

(a) Answer: bonds were issued at a discount

_________________________________________________

(b)

Answer: amortization schedule is based on the effective interest method

Explanation: Because in the straight line method interest amount and amortization figure remain uniform

_______________________________________________

(c)

Determine the stated interest rate and the effective interest rate.

Stated Interest rate = annual interest payable / Book value * 100

= 13255 / (113691+6809) * 100

=13255 / 120500 * 100

=11%

Effective interest rate

= 13643 / 113691 * 100

=12%

______________________________________________

(d)

On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1,

Date

Description

Debit $

Credit $

Jan-1-2018

Cash

113691

Discount on Bonds payable

6809

Bonds payable

120500

___________________________________________

(e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2001. (Interest is paid January 1.)

Date

Description

Debit $

Credit $

Dec-31-2011

Interest Expense

13643

Discount on Bonds payable

388

Interest payable

13255

____________________________________________________

(f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2018. Capulet Corporation does not use reversing entries.

Date

Description

Debit $

Credit $

Dec-31-2018

Interest Expense

14133

Discount on Bonds payable

878

Interest payable

13255

Date

Description

Debit $

Credit $

Jan-1-2018

Cash

113691

Discount on Bonds payable

6809

Bonds payable

120500

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