12/31/13
Interest expense
54.168
Premium bonds payable
5.832
interest payable
60.000
53.861
(e) Prepare the j ournal entry to record the accrual of interest and the amortization of the premium on December 31, 2013.
$77.217
$1.077.217
Interest payable
60.000
(d) Prepare the journal entry to record the payment of interest on January 1, 2013.
01/01/13
Interest P ayable
53.861
Cash
(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2012.
12/31/12
Interest expense
53.861
Premiumbonds payable
6.139
3
60.000
54.142
$5.848
59.398
1.059.398
2
60.000
54.168
$5.832
65.246
1.065.246
1
(D)
(E)
$60.000
$53.861
$6.139
71.078
1.071.078
Interest
Expense
to be
Recorded
Premium
Amor-
tization
(A) - (B)
Unamor-
tized
Premium
(D) - (C)
Bond
Carrying
Value
($1.000.000 + D)
Issue date
(1.000.000*6%)
PEDRAZA CORPORATION
Bond P remium Amortization
Effective-Interest Method—Annual Interest P ayments
6% Bonds Issued at 5%
Annual
Interest
Periods
(A)
(B)
(C)
Interest
to be
Paid
77.217
(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2012.
(b) Prepare an amortization table through December 31, 2014 (three interest periods) for this bond issue.
01/01/12
Cash
1.077.217
Bonds P ayable
1.000.000
Premium bonds payable
Instru ctions: (Round all computations to the nearest dollar. )
Instr uctor:
Course:
Financial Accounting, Sixth Edition by Kimmel, Weygandt, and Kieso
Primer on Using Excel in Accounting by Rex A Schildhouse
P10-10B, Prepare jou rnal entries to record issuance of bonds, payment of interest, and amortization of bond premium
usin g effective interest method.
or discount. The bonds pay annual interest January 1.
10
-year bonds at
$1.077.217
This price resulted in an effective-interest rate of
5%
on the bonds. Pedraza uses the effective-interest method to amortize bond premium or
Name:
PAOLA ORPELLA MONTANÉ
Date:
On January 1, 2012, Pedraza Corporation issued
$1.000.000
face value,
6%
