Amortization Schedule Carrying Value Amount Year Cash Interest Unamortized $ 94,349 1/1/2011 2011 $5,651 5,329 $11,000 $11,322 11,361 11,404 94,671 95,032 95,436 95,888 96,395 96,962 97,597 98,309 99,106 2012 2013 11,000 11,000 4,968 4,564 2014 11,452 11,507 11,567 11,635 11,000 4,112 2015 2016 11,000 11,000 3,605 3,038 2,403 2017 11,000 2018 2019 11,000 11,000 11,7 11,797 1,691 894 2020 11,000 11,894 100,000
(Analysis of Amortization Schedule and Interest Entries) The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2011, and the subsequent interest
payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.
Check the following image for financial statements.
Instructions
(a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.
(b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method, and how you can determine which method is used.
(c) Determine the stated interest rate and the effective-interest rate.
(d) On the basis of the schedule above, prepare the
(e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2011. (Interest is paid January 1.)
(f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2018. Capulet Corporation does not use reversing entries.
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