On January 1, 2014 Victory Falls Company issued $2,100,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 8% and pay interest quarterly each year. When the bonds were sold, the market rate of interest was 6%. These bonds, when issued and sold, contained a call feature, which allowed the company to retire the bonds early, if they elected, for a one-time payment equal to 1% of the book value at the time of retirement. Effective-Interest Method Date Interest Payment Interest Expense Premium Amortization* Unamortized Premium Book Value 1-Jan-14 $ 180 271 $ 2 280 271 31-Mar-14 42 000 34 204 7 796 172 475 2 272 475 30-Jun-14 42 000 34 087 7 913 164 562 2 264 562 30-Sep-14 42 000 33 968 8 032 156 530 2 256 530 31-Dec-14 42 000 33 848 8 152 148 378 2 248 378 31-Mar-15 42 000 33 726 8 274 140 104 2 240 104 30-Jun-15 42 000 33 602 8 398 131 706 2 231 706 30-Sep-15 42 000 33 476 8 524 123 181 2 223 181 31-Dec-15 42 000 33 348 8 652 114 529 2 214 529 31-Mar-16 42 000 33 218 8 782 105 747 2 205 747 30-Jun-16 42 000 33 086 8 914 96 833 2 196 833 30-Sep-16 42 000 32 952 9 048 87 785 2 187 785 31-Dec-16 42 000 32 817 9 183 78 602 2 178 602 31-Mar-17 42 000 32 679 9 321 69 281 2 169 281 30-Jun-17 42 000 32 539 9 461 59 820 2 159 820 30-Sep-17 42 000 32 397 9 603 50 218 2 150 218 31-Dec-17 42 000 32 253 9 747 40 471 2 140 471 31-Mar-18 42 000 32 107 9 893 30 578 2 130 578 30-Jun-18 42 000 31 959 10 041 20 537 2 120 537 30-Sep-18 42 000 31 808 10 192 10 345 2 110 345 31-Dec-18 42 000 31 655 10 345 (0) 2 100 000 I just need H now: H. Victory Falls Company elected to retire the bonds early on June 30, 2015, after the final interest payment.Give the journal entries to record the interest expense on June 30, 2015 first, and then the retirement of bonds using the effective interest method. Is it right 30-Jun-15 Bonds payable 2 100 000 Premium on bonds payable 131 706 Loss on bond call (109 388) Cash 2 122 317
On January 1, 2014 Victory Falls Company issued $2,100,000 in bonds that mature in 5 years.
The bonds have a stated interest rate of 8% and pay interest quarterly each year.
When the bonds were sold, the market rate of interest was 6%.
These bonds, when issued and sold, contained a call feature, which allowed the company to retire the bonds early, if they elected, for a one-time payment equal to 1% of the book value at the time of retirement.
Effective-Interest Method | ||||||
Date |
|
Interest Expense | Premium Amortization* | Unamortized Premium | Book Value | |
1-Jan-14 | $ 180 271 | $ 2 280 271 | ||||
31-Mar-14 | 42 000 | 34 204 | 7 796 | 172 475 | 2 272 475 | |
30-Jun-14 | 42 000 | 34 087 | 7 913 | 164 562 | 2 264 562 | |
30-Sep-14 | 42 000 | 33 968 | 8 032 | 156 530 | 2 256 530 | |
31-Dec-14 | 42 000 | 33 848 | 8 152 | 148 378 | 2 248 378 | |
31-Mar-15 | 42 000 | 33 726 | 8 274 | 140 104 | 2 240 104 | |
30-Jun-15 | 42 000 | 33 602 | 8 398 | 131 706 | 2 231 706 | |
30-Sep-15 | 42 000 | 33 476 | 8 524 | 123 181 | 2 223 181 | |
31-Dec-15 | 42 000 | 33 348 | 8 652 | 114 529 | 2 214 529 | |
31-Mar-16 | 42 000 | 33 218 | 8 782 | 105 747 | 2 205 747 | |
30-Jun-16 | 42 000 | 33 086 | 8 914 | 96 833 | 2 196 833 | |
30-Sep-16 | 42 000 | 32 952 | 9 048 | 87 785 | 2 187 785 | |
31-Dec-16 | 42 000 | 32 817 | 9 183 | 78 602 | 2 178 602 | |
31-Mar-17 | 42 000 | 32 679 | 9 321 | 69 281 | 2 169 281 | |
30-Jun-17 | 42 000 | 32 539 | 9 461 | 59 820 | 2 159 820 | |
30-Sep-17 | 42 000 | 32 397 | 9 603 | 50 218 | 2 150 218 | |
31-Dec-17 | 42 000 | 32 253 | 9 747 | 40 471 | 2 140 471 | |
31-Mar-18 | 42 000 | 32 107 | 9 893 | 30 578 | 2 130 578 | |
30-Jun-18 | 42 000 | 31 959 | 10 041 | 20 537 | 2 120 537 | |
30-Sep-18 | 42 000 | 31 808 | 10 192 | 10 345 | 2 110 345 | |
31-Dec-18 | 42 000 | 31 655 | 10 345 | (0) | 2 100 000 | |
I just need H now:
H. Victory Falls Company elected to retire the bonds early on June 30, 2015, after the final interest payment.
Give the
Is it right
30-Jun-15 | ||
Bonds payable | 2 100 000 | |
Premium on bonds payable | 131 706 | |
Loss on bond call | (109 388) | |
Cash | 2 122 317 |
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