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Question 5 (10 Marks) On December 31, 2020, Whitfield Corp. issued $ 400,000 of 10% bonds, due on December 31, 2025. Interest is to be
Question 5 (10 Marks)
On December 31, 2020, Whitfield Corp. issued $ 400,000 of 10% bonds, due on December 31, 2025. Interest is to be paid semi-annually on June 30 and December 31. The bonds were sold at a market value of $432,444 to yield 8% effective annual interest. Whitfield has a calendar year end.
Required:
- Complete the following amortization schedule for the dates indicated. Round all answers to the nearest dollar. Use the effective-interest method. (4marks)
| Cash interest paid | Interest expense | Premium Amortization | Carrying amount of bonds |
Dec. 31,2020
|
|
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| $432,444 |
June 30, 2021
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Dec. 31, 2021
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|
|
|
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- Prepare the journal entry for Whitfield at December 31, 2021, to record the payment of 6 months interest (from June 30 to December 31) and related expense. (3 marks)
| Debit | Credit |
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- Assume instead that Whitfield is using the straight line method to amortize the bond premium. What would be the carrying amount of the bonds at December 31, 2021? (3 marks)
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