Effective Interest Premium Amortization

Instructions

Chart of Accounts

General Journal

Analysis

Instructions

Polk Incorporated issued $213,000 of 9% bonds on July 1, 2016, for $220,918.63. The bonds were dated January 1, 2016, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 8%. Polk uses the effective interest method of amortization.

Required:

Prepare the journal entries to record the issue of the bonds on July 1, 2016, and the interest payments on December 31, 2016, and June 30, 2017. In addition, prepare a bond interest expense and premium amortization schedule for the bonds through June 30, 2017.

Chart of Accounts

CHART OF ACCOUNTS

Polk Incorporated

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
255	Bonds Payable
256	Premium on Bonds Payable
257	Discount on Bonds Payable
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

General Journal

Prepare the journal entries to record the issue of the bonds on July 1, 2016, and the interest payments on December 31, 2016, and June 30, 2017. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9

Analysis

Prepare a bond interest expense and discount amortization schedule for the bonds through June 30, 2017. Additional Instructions

POLK INCORPORATED
Bond Interest Expense and Discount Amortization Schedule (Partial)
Effective Interest Method 9% Bonds Sold to Yield 8%
Date	Cash Credit	Interest Expense Debit	Unamortized Discount Credit	Book Value of Bonds
07/01/16
12/31/16
06/30/17