AC301-03_Marjorie Bowden-Project-Unit 8

AC301-03_Marjorie Bowden-Project-Unit 8 - P14-3 Premium...

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The Dorsett Corporation issued $600,000 of 13% bonds on January 1, 2009 for $614,752.24. The bonds are due December 31, 2011, were issued to yield 12%, and pay interest semiannually on June 30 and December 31. The company uses the effective interest method. Required 2. Assume the company retired the bonds on September 30, 2011 for $630,000, which includes accrued interest. Prepare P14-3 Premium Amortization Schedule with Retirement Before Maturity 1. Prepare a bond interest expense and premium amortization schedule. (round to two decimal places) the journal entry to record the bond retirement. (round to two decimal places)
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Name: Marjorie Bowden An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions. Required DORSETT CORPORATION Bond Interest Expense and Premium Amortization Schedule Effective Interest Method 13% Bonds Sold to Yield 12% Interest Unamortized Cash Expense Premium Book Value Date Credit Debit Debit of Bonds 1/1/2009 $614,752.24 6/30/2009 $39,000 $36,885.13 $2,114.87 612,637.37 12/31/2009 39,000 36,758.24 2,241.76 610,395.61 6/30/2010 39,000 36,623.74 2,376.26 608,019.35 12/31/2010 39,000 36,481.16 2,518.84 605,500.51 6/30/2011 39,000 36,330.03 2,669.97 602,830.54 12/31/2011 39,000 36,169.83 2,830.54 600,000.00 Face Value of Bonds x 13% Bonds x Semiannual (1/2 year) = Semiannual Cash Payment $600,000 13% 0.50 $39,000 Previous Book Value x 12% Yield x Semiannual (1/2 year) = Interest Expense 6/30/2009 $614,752.24 12% 0.50 $36,885.13 12/31/2009 612,637.37 12% 0.50 36,758.24 6/30/2010 610,395.61 12% 0.50 36,623.74 12/31/2010 608,019.35 12% 0.50 36,481.16 6/30/2011 605,500.51 12% 0.50 36,330.03 12/31/2011 602,830.54 12% 0.50 36,169.83 Semiannual Cash Payment - Interest Expense = Unamortized Premium 6/30/2009 $39,000 $36,885.13 $2,114.87 12/31/2009 39,000 36,758.24 2,241.76 6/30/2010 39,000 36,623.74 2,376.26 12/31/2010 39,000 36,481.16 2,518.84 6/30/2011 39,000 36,330.03 2,669.97 12/31/2011 39,000 36,169.83 2,830.17 2. Assume the company retired the bonds on September 30, 2011 for $630,000, which includes accrued interest. Prepare September 30, 2011 to Record Partial Period Interest: Interest Expense Calculation- 12/31/11 Interest Expense x Number of Months/6 months = Prorated Interest Expense for September 30, 2011 retirement $36,169.83 0.50 $18,084.92 Cash Payment - 12/31/11 Cash Payment x Number of Months/6 months = Prorated Cash Payment for September 30, 2011 retirement $39,000.00 0.50 $19,500.00 Premium on Bonds Payable - Prorate Cash Payment - Prorated Interest Expense = Prorated Premium on Bonds Payable $19,500.00 18,084.92 $1,415.08 Interest Expense $18,084.92 Premium on Bonds Payable 1,415.08 Interest Payable $19,500.00 September 30, 2011 to Record Official Sale of the Bonds: Bonds Payable $600,000.00 Premium on Bonds Payable 1,415.08 Interest Payable 19,500.00 Loss on Bond Retirement 9,084.92 Cash $630,000.00 P14-3 Premium Amortization Schedule with Retirement Before Maturity 1. Prepare a bond interest expense and premium amortization schedule. (round to two decimal places) a Semiannual Cash Payment b Interest Expense Calculation b 1 b 2 b 3 b 4 b 5 b 6 c Unamortized Premium c 1 c 2 c 3 c 4 c 5 c 6 the journal entry to record the bond retirement. (round to two decimal places)
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Name: Solutions An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions.
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