Problem 14-1

The following amortization and interest schedule reflects the issuance of 10-year bonds by Sweet 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						$10,402		$ 173,698
2011		$20,251		$20,844		9,809		174,291
2012		20,251		20,915		9,145		174,955
2013		20,251		20,995		8,401		175,699
2014		20,251		21,084		7,568		176,532
2015		20,251		21,184		6,635		177,465
2016		20,251		21,296		5,590		178,510
2017		20,251		21,421		4,420		179,680
2018		20,251		21,562		3,109		180,991
2019		20,251		21,719		1,641		182,459
2020		20,251		21,892				184,100

(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 0 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 required, select "No Entry" for the account titles and 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

(e) On the basis of the schedule above, prepare the journal entry to reflect the bond transactions and accruals for 2011. (Interest is paid January 1.) (If no entry is required, select "No Entry" for the account titles and 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
December 31, 2011

(f) On the basis of the schedule above, prepare the journal entries to reflect the bond transactions and accruals for 2018. Sweet Corporation does not use reversing entries. (If no entry is required, select "No Entry" for the account titles and 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