Problem - In each of the following independent cases the company closes its books on December 31.
1. Sanford Co. sells $512,300 of 8% bonds on March 1, 2014. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2017. The bonds yield 12%.
Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end.
Prepare all of the relevant journal entries from the time of sale until the date indicated. (Assume that no reversing entries were made.)
2. Titania Co. sells $412,000 of 12% bonds on June 1, 2014. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2018. The bonds yield 8%. On October 1, 2015, Titania buys back $127,000 worth of bonds for $133,240 (includes accrued interest).
Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end.
Prepare all of the relevant journal entries from the time of sale until the date indicated. Give entries through December 1, 2016. (Assume that no reversing entries were made.)