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Problem 14-1 The following amortization and interest schedule reflects the issuance of 10-year bonds by Sage Corporation on January 1, 2011, and the subsequent interest
Problem 14-1
The following amortization and interest schedule reflects the issuance of 10-year bonds by Sage Corporation on January 1, 2011, and the subsequent interest payments and charges. The companys year-end is December 31, and financial statements are prepared once yearly.
Amortization Schedule | ||||||||
Year | Cash | Interest | Amount Unamortized | Carrying Value | ||||
1/1/2011 | $24,116 | $ 189,284 | ||||||
2011 | $21,340 | $22,714 | 22,742 | 190,658 | ||||
2012 | 21,340 | 22,879 | 21,203 | 192,197 | ||||
2013 | 21,340 | 23,064 | 19,479 | 193,921 | ||||
2014 | 21,340 | 23,271 | 17,548 | 195,852 | ||||
2015 | 21,340 | 23,502 | 15,386 | 198,014 | ||||
2016 | 21,340 | 23,762 | 12,964 | 200,436 | ||||
2017 | 21,340 | 24,052 | 10,252 | 203,148 | ||||
2018 | 21,340 | 24,378 | 7,214 | 206,186 | ||||
2019 | 21,340 | 24,742 | 3,812 | 209,588 | ||||
2020 | 21,340 | 25,152 | 213,400 |
(a) Indicate whether the bonds were issued at a premium or a discount. (b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method (c) Determine the stated interest rate and the effective-interest rate. (Round answers to O decimal places,e.g. 18%.) The stated rate The effective rate (d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2011. (If no entry is enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2011
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