Recording Bond Entries and Preparing an Amortization Schedule—Debt Issuance CostsMitchell Inc. issued 240, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each July 1, and December 31, and were issued to yield 7%. Debt issuance costs were $4,800. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts and debt issuance costs. Required a. Determine the selling price of the bonds, net of debt issuance costs. Round to the nearest dollar.b. Prepare an amortization schedule for the full bond term. c. Prepare journal entries on the following dates. 1. January 1, 2020, bond issuance. 2. July 1, 2020, interest payment. 3. December 31, 2020, interest payment. **Instructions:**- **Note:** Round amounts in the schedule to the nearest whole dollar. Use rounded amounts for later calculations in the schedule.- **Note:** Include any net rounding difference for Bond Payable, Net in the interest expense amount for Dec. 31, 2022.**Table:**| Date | Cash | Interest Expense | Discount Amortization | Bonds Payable, Net ||--------------|------|------------------|-----------------------|--------------------|| Jan. 1, 2020 | $ | $ | $ | $ || July 1, 2020 | $ | $ | $ | $ || Dec. 31, 2020| $ | $ | $ | $ || July 1, 2021 | $ | $ | $ | $ || Dec. 31, 2021| $ | $ | $ | $ || July 1, 2022 | $ | $ | $ | $ || Dec. 31, 2022| $ | $ | $ | $ || **Total** | $ | $ | $ | |This table represents a schedule for financial calculations related to bonds over several periods (from January 1, 2020, to December 31, 2022). Different financial metrics are tracked such as Cash, Interest Expense, Discount Amortization, and Bonds Payable, Net. c.- **Note:** List multiple debits or credits (when applicable) in alphabetical order.- **Note:** Round your answers to the nearest whole dollar.| | **Date** | **Account Name** | **Dr.** | **Cr.** ||-------|-----------------|------------------|---------|---------|| 1. | Jan. 1, 2020 | | | || | | | | || | | | | || 2. | Jul. 1, 2020 | | | || | | | | || | | | | || 3. | Dec. 31, 2020 | | | || | | | | || | | | | |This table is an empty accounting ledger used for recording transactions. Columns are labeled for the date, account name, and amounts in debit (Dr.) and credit (Cr.) columns. It includes three dates: January 1, 2020, July 1, 2020, and December 31, 2020. Students are expected to fill in the entries, listing any multiple debits or credits in alphabetical order, and rounding all amounts to the nearest whole dollar.

Bond Amortization: When bonds are issued at a price less than the face value, it is called bonds…

Answered: Mitchell Inc. issued 240, 6%, $1,000…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Recording Bond Entries and Preparing an Amortization Schedule—Debt Issuance Costs

Mitchell Inc. issued 240, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each July 1, and December 31, and were issued to yield 7%. Debt issuance costs were $4,800. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts and debt issuance costs.

Required

a. Determine the selling price of the bonds, net of debt issuance costs. Round to the nearest dollar.

b. Prepare an amortization schedule for the full bond term.

c. Prepare journal entries on the following dates.

1. January 1, 2020, bond issuance.

2. July 1, 2020, interest payment.

3. December 31, 2020, interest payment.

**Instructions:**

- **Note:** Round amounts in the schedule to the nearest whole dollar. Use rounded amounts for later calculations in the schedule.
- **Note:** Include any net rounding difference for Bond Payable, Net in the interest expense amount for Dec. 31, 2022.

**Table:**

| Date | Cash | Interest Expense | Discount Amortization | Bonds Payable, Net |
|--------------|------|------------------|-----------------------|--------------------|
| Jan. 1, 2020 | $ | $ | $ | $ |
| July 1, 2020 | $ | $ | $ | $ |
| Dec. 31, 2020| $ | $ | $ | $ |
| July 1, 2021 | $ | $ | $ | $ |
| Dec. 31, 2021| $ | $ | $ | $ |
| July 1, 2022 | $ | $ | $ | $ |
| Dec. 31, 2022| $ | $ | $ | $ |
| **Total** | $ | $ | $ | |

This table represents a schedule for financial calculations related to bonds over several periods (from January 1, 2020, to December 31, 2022). Different financial metrics are tracked such as Cash, Interest Expense, Discount Amortization, and Bonds Payable, Net.

c.

- **Note:** List multiple debits or credits (when applicable) in alphabetical order.
- **Note:** Round your answers to the nearest whole dollar.

| | **Date** | **Account Name** | **Dr.** | **Cr.** |
|-------|-----------------|------------------|---------|---------|
| 1. | Jan. 1, 2020 | | | |
| | | | | |
| | | | | |
| 2. | Jul. 1, 2020 | | | |
| | | | | |
| | | | | |
| 3. | Dec. 31, 2020 | | | |
| | | | | |
| | | | | |

This table is an empty accounting ledger used for recording transactions. Columns are labeled for the date, account name, and amounts in debit (Dr.) and credit (Cr.) columns. It includes three dates: January 1, 2020, July 1, 2020, and December 31, 2020. Students are expected to fill in the entries, listing any multiple debits or credits in alphabetical order, and rounding all amounts to the nearest whole dollar.

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