In each of the following independent cases the company closes its books on December 31.
1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2010. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2013. The bonds yield 12%. Give entries through December 31, 2011.
2. Titania Co. sells $400,000 of 12% bonds on June 1, 2010. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds yield 10%. On October 1, 2011, Titania buys back $120,000 worth of bonds for $126,000 (includes accrued interest). Give entries through December 1, 2012.
Instructions
For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective-interest method for discount and premium amortization.