Problem 14-6 Presented below are selected transactions on the books of Tamarisk
ID: 2605818 • Letter: P
Question
Problem 14-6 Presented below are selected transactions on the books of Tamarisk Corporation May 1, 2017 Bonds payable with a par value of $916,800, which are dated January 1, 2017, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 11% (payable annually at January 1), and mature January 1, 2027. (Use interest expense account for accrued interest.) Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Dec. 31 Jan. 1, 2018 Interest on the bonds is paid. April 1 Bonds with par value of $366,720 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium Dec. 31 amortized Prepare journal entries for the transactions above. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answers to 0 decimal places, e.g. 38,548. 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 May 1, 2017 Cash 1005424 Bonds Payable Premium on Bonds Payable Interest Expense 916800 55624 33000Explanation / Answer
Sale proceeds:
Buyback of bonds workings:
2018
Year date Account Debit Credit 2017 May.1 Cash 10,05,424 Bonds payable 9,16,800 Premium on bonds payable 55,008 Interest expense 33,616 2017 Dec.31 Interest expense 1,00,848.00 Interest payable 100848 2017 Dec.31 Premium on bonds payable 5,500.80 Interest expense 5,500.80 2018 Jan.1 Interest payable 100848 Cash 100848 2018 Apr.1 bonds payable 3,66,720 Premium on bonds payable 19,802.88 Interest expense 10,084.80 Cash 3,84,139.20 gain on redemption of debt 12,468.48 2018 Dec.31 Interest expense 60,508.80 Interest payable 60,508.80 2018 Dec.31 Premium on bonds payable 3,300.48 Interest expense 3,300.48