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Bond interest and discount amortization:

Logan Corporation issued $800,000 of 8% bonds on October 1, 2011, due on October 1, 2016. The interest is to be paid twice a year on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. Logan Corporation closes its books annually on December 31.

Instructions:

A) Complete an amortization schedule for the above bond (for all periods) in a similar format as below. (Round all the answers to nearest dollar). Use the effective-interest method.

451_amortization.jpg

B) Make the journal entries for the given:

1) October 1, 2011 bond issue.
2) Adjusting entry for December 31, 2011(adjusting entry must cover 3 months).
3) April 1, 2012 entry.
4) October 1, 2012 entry.
5) Adjusting entry from December 31, 2012.

C) find out the interest expense to be reported in the income statement for the year ended December 31, 2011 and December 31, 2012.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M91811

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