The following amortization and interest schedule reflects the issuance of 10 year bonds by CMA Corporation on January 1, 2019, and the subsequent interest payment and charges. The Company’s year end is December 31, and the financial statements are prepared once yearly. Amortization Schedule Amount Year 1/1/2019 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Cash Interest P11,000 11,000 P11,322 11,000 11,361 11,000 11,404 11,000 11,452 11,000 11,507 11,000 11,567 11,000 11,635 11,000 11,712 11,000 11,797 11,000 11,894 Unamortized P5,651 5,329 4,968 4,564 4,112 3,605 3,038 2,403 1,691 894 Carrying Value P94,349 94,671 95,032 95,436 95,888 96,395 96,962 97,597 98,309 99,106 100,00 Instructions: (a) Indicate whether the bonds were issued at a premium or 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.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The following amortization and interest schedule reflects the issuance of 10 year bonds by CMA Corporation on January 1, 2019, and the subsequent interest payment and charges. The Company’s year end is December 31, and the financial statements are prepared once yearly.
Amortization Schedule Amount
Year
1/1/2019
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028 Cash Interest
P11,000
11,000 P11,322
11,000 11,361
11,000 11,404
11,000 11,452
11,000 11,507
11,000 11,567
11,000 11,635
11,000 11,712
11,000 11,797
11,000 11,894 Unamortized
P5,651
5,329 4,968
4,564
4,112
3,605
3,038
2,403
1,691 894 Carrying Value
P94,349 94,671
95,032
95,436
95,888
96,395
96,962
97,597
98,309
99,106
100,00
Instructions:
(a) Indicate whether the bonds were issued at a premium or discount and how you can determine this fact from the schedule.
(b) Indicate whether the amortization schedule is based on the
(c) Determine the stated interest rate and the effective interest rate.
(d) On the basis of 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 2019. (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 2026. CMA Corporation does not use reversing entries.
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