On January 1, 2018, Seventh Mountain Inc. issued $6,000,000 of 6% 12 year, callable bonds priced...

Transcribed Image Text:

On January 1, 2018, Seventh Mountain Inc. issued $6,000,000 of 6% 12 year, callable bonds priced to yield 7%. The bonds may be called at 103 on or after December 31, 2023. Interest is payable on July 1 and January 1. Seventh Mountain calls 50% of the bonds on June 1, 2025, (Note: they must also pay the interest accrued to that point on those bonds) A. Prepare an amortization schedule for 2018 - 2030. B. Prepare proper journal entries for the following: 1. 2. Issuance of the bonds for cash on January 1, 2018 For the period of July 1, 2018 to January 1, 2020. || a. Adjusting entries (December 31 Year-end); b. Interest payments and amortization (effective interest method) of premium/discount 3. On Redemption June 1, 2025: a. Accrual of interest to the date of redemption for bonds being called b. Payment to bondholders, including interest C. Recognition of gain or loss at on June 1, 2025. On January 1, 2018, Seventh Mountain Inc. issued $6,000,000 of 6% 12 year, callable bonds priced to yield 7%. The bonds may be called at 103 on or after December 31, 2023. Interest is payable on July 1 and January 1. Seventh Mountain calls 50% of the bonds on June 1, 2025, (Note: they must also pay the interest accrued to that point on those bonds) A. Prepare an amortization schedule for 2018 - 2030. B. Prepare proper journal entries for the following: 1. 2. Issuance of the bonds for cash on January 1, 2018 For the period of July 1, 2018 to January 1, 2020. || a. Adjusting entries (December 31 Year-end); b. Interest payments and amortization (effective interest method) of premium/discount 3. On Redemption June 1, 2025: a. Accrual of interest to the date of redemption for bonds being called b. Payment to bondholders, including interest C. Recognition of gain or loss at on June 1, 2025.