Mitchell Inc. issued 60 of its 6%. $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each June 30 and December 31 and were issued to yield 5%. The bonds mature in five years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. b. Prepare an amortization schedule for the first two years of the bond term. c. Prepare journal entries on the following dates. 1. January 1 of Year 1, bond issuance. 2. June 30 of Year 1, interest payment. 3. December 31 of Year 1, interest payment. Bond Selling Price Amortization Schedule Note: Round amounts in schedule to the nearest whole dollar. Note: Do not use negative signs. b. Date Jan 1, Year 1 Jun. 30. Year 1 S Dec. 31, Year 1$ Jun, 30. Year 2 S Dec. 31, Year 2 S Cash Interest Expense Premium Amortization 1.800 S 1,800 $ 1,800 S 1,800 ✓ S Journal Entries 1.566 $ 1,560 $ 1,577 x S 1,583 x S $ 234 S 240 S 223 x S 217 x S Bonds Payable, Net 62.626 ✓ 62.860 x 63.068 x 63.311 x 63094

Mitchell Inc. issued 60 of its 6%. $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each June 30 and December 31 and were issued to yield 5%. The bonds mature in five years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. b. Prepare an amortization schedule for the first two years of the bond term. c. Prepare journal entries on the following dates. 1. January 1 of Year 1, bond issuance. 2. June 30 of Year 1, interest payment. 3. December 31 of Year 1, interest payment. Bond Selling Price Amortization Schedule Note: Round amounts in schedule to the nearest whole dollar. Note: Do not use negative signs. b. Date Jan 1, Year 1 Jun. 30. Year 1 S Dec. 31, Year 1$ Jun, 30. Year 2 S Dec. 31, Year 2 S Cash Interest Expense Premium Amortization 1.800 S 1,800 $ 1,800 S 1,800 ✓ S Journal Entries 1.566 $ 1,560 $ 1,577 x S 1,583 x S $ 234 S 240 S 223 x S 217 x S Bonds Payable, Net 62.626 ✓ 62.860 x 63.068 x 63.311 x 63094

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

ChapterMB: Model-building Problems

Section: Chapter Questions

Problem 13M

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