G H Calculation of gain on redemption 10/1/21 12/1/21 12/31/21 671/22 5 5 7 8 12/122 1 2 773 A B c D E F G H 1 P14-5 (L01.2) Comprehensive Bond Problem In each of the following independent cases the company closes its books on December 31. 3 1. Sandford Co. sells bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. Pertinent information follows: 2 4 5 6 7 6 Par value of the bonds Stated interest rate Bond yield rate $500,000 10% 1224 Give the entries through December 31, 2021. 10 11 12 2. Titania Co. sells bonds on June 1, 2020. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2024. On October 1, 2021. Titania buys back a portion of the bonds. Additional information follows: 10 = 18 19 20 Par value of the bonds issued Stated interest rate Bond yield rate Face amount of bonds bought back Amount paid to buy back bonds including interest $ 400,000 12% 10% $ 120,000 $ 126,000 22 23 Give the entries through December 1, 2022. 24 Note: Excel uses more decimal places than used in the solutions provided by the author. As 25 such, the answers shown below will differ slightly from those in the solutions manual due to 26 rounding and significant digits. 27 28 Instructions: 29 For the two cases prepare all of the relevant journal entries from the time of sale until the 30 date indicated. Use the effective-interest method for discount and premium amortization 31 (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.) 33 34 Sanford Co. 32 3 Titania Co. Calculation of issue price and discount using Excel's PV function: 31 PVE $425,852.85 83 34 95 96 97 98 33 100 101 102 103 104 105 106 107 108 109 110 111 Schedule of Bond Premium Amortization Effective Interest Method 12% Bonds Sold to Yield 10% Date Paid Expense Premium Value Jun 1,20 $ 425,853 Dec 1, 20$ 24,000 $ 21,293 $ 12,707) 423,145 Jun 1, 21 $ 24,000 $ 21,157 (2,843) 420,303 Dec 1,21 $ 24,000 $ 21,015 (2,985) 417,318 Jun 1.22 $ 24,000 $ 20,866 13,134) 414,184 Dec 1.22 $ 24,000 $ 20,709 13,291) 410,893 Jun 1,23 $ 24,000 $ 20,545 (3,455) 407,438 Dec 1,23 $ 24,000 $ 20,372 13,628) 403,810 Jun 1.24 $ 24,000 $ 20,190 (3,810) 400,000 671/20 Cash Debit 425,853 Credit 112 113 114 115 116 117 118 119 Premium on Bonds Payable Bonds Payable 25,853 400,000 1211/20 Interest Expense Premium on Bonds Payable 21,293 2707