n December 31,

2020,

Sierra

Corp. issues

4

percent, 10-year convertible bonds with a maturity value of

$4,500,000.

The semi-annual interest dates are June 30 and December 31. The market interest rate is

5

percent, and the issue price of the bonds is

92.2054.

Sierra

Corp. amortizes bond premium and discount by the effective-interest method.Required

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Requirement 1. Prepare an effective-interest method amortization table for the first four semi-annual interest periods. (Round your answers to the nearest dollar.)

Sierra Corp.
Amortization Table
	A	B	C	D	E
	Interest	Interest Expense		Unamortized
	Payment	(2.5% of	Discount	Discount Account	Bond Carrying
Semi-annual	(2.0% of	Preceding Bond	Amortization	Balance	Amount
Interest Period	Maturity Values)	Carrying Amount)	(B A)	(D C)	($4,500,000 D)
Dec. 31, 2020

Jun. 30, 2021

Dec. 31, 2021

Jun. 30, 2022

Dec. 31, 2022

Requirement 2. Journalize the transactions. (Record debits first, then credits. Exclude explanations from journal entries. Round amounts to the nearest dollar.)

a. Issuance of the bonds on December 31,

2020.

Credit Convertible Bonds Payable.

Journal Entry
Date		Accounts	Debit	Credit
2020
Dec.	31

b. Payment of interest on June 30,

2021.

Journal Entry
Date		Accounts	Debit	Credit
2021
Jun.	30

c. Payment of interest on December 31,

2021.

Journal Entry
Date		Accounts	Debit	Credit
Dec.	31

d. Retirement of bonds with maturity value of

$200,000

on July 2,

2022.

Sierra

Corp. purchases the bonds at

96.00

in the open market. (Hold all decimals in interim calculations. Round your answer to the nearest dollar.)

Journal Entry
Date		Accounts	Debit	Credit
2022
Jul.	2

e. Conversion by the bondholders on July 2,

2022,

of bonds with maturity value of

$400,000

into

5,000

Sierra

Corp. common shares.

Journal Entry
Date		Accounts	Debit	Credit
Jul.	2

Requirement 3. Prepare the balance sheet presentation of the bonds payable that are outstanding at December 31,

2022.

(Calculate the discount by multiplying the discount calculated in the original amortization table by the fraction of bonds remaining. Enter parentheses or a minus sign for numbers to be subtracted. Hold all decimals in interim calculations. Round your answers to the nearest dollar.)

Sierra Corp.
Partial Balance Sheet
December 31, 2022
	Less:

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Required

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1.	Prepare an effective-interest method amortization table for the first four semi-annual interest periods.
2.	Journalize the following transactions:
a.	Issuance of the bonds on December 31, 2020. Credit Convertible Bonds Payable.
b.	Payment of interest on June 30, 2021.
c.	Payment of interest on December 31, 2021.
d.	Retirement of bonds with maturity value of $200,000 on July 2, 2022. Sierra Corp. purchases the bonds at 96.00 in the open market.
e.	Conversion by the bondholders on July 2, 2022, of bonds with maturity value of $400,000 into 5,000 Sierra Corp. common shares.
3.	Prepare the balance sheet presentation of the bonds payable that are outstanding at December 31, 2022.