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Able Electronics issues $440,000 of 6%, 7 year bonds on January 1, 2013. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $426,800.
a) Prepare the January 1, 2013, journal entry to record the bonds' issuance, and prepare the journal entry necessary on June 30 and Dec 31 each year when interest is paid. Round answers to the nearest cent.
| Date | Description | Debit | Credit |
|---|---|---|---|
| 01/01 | |||
| 01/01 | |||
| 01/01 | |||
| 01/01 | to record the sale of bonds at a discount | ||
| 06/30 | |||
| 06/30 | |||
| 06/30 | |||
| 06/30 | to record the semi-annual interest payment & amortization of discount on bonds | ||
b) Use the straight-line method to complete the amortization table below for the bond sold at discount. Round answers to the nearest cent.
| Semiannual Interest Period | Unamortized Discount | Carrying Value | |
|---|---|---|---|
| Year 1 | Issue date | ||
| 06/30 | |||
| 12/31 | |||
| Year 2 | 06/30 | ||
| 12/31 | |||
| Year 3 | 06/30 | ||
| 12/31 | |||
| Year 4 | 06/30 | ||
| 12/31 | |||
| Year 5 | 06/30 | ||
| 12/31 | |||
| Year 6 | 06/30 | ||
| 12/31 | |||
| Year 7 | 06/30 | ||
| 12/31 |