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Problem 14-1 The following amortization and interest schedule reflects the issuance of 10-year bonds by

Problem 14-1 The following amortization and interest schedule reflects the issuance of 10-year bonds by

Problem 14-1
The following amortization and interest schedule reflects the issuance of 10-year bonds by Waterway Corporation on January 1, 2011, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.

Amortization Schedule

year cash interest amount unamortized

carrying value

1/1/2011     10,114 168,886
2011 19,690 20,266 9,538 169,462
2012 19,690 20,335 8,893 170,107
2013 19,690 20,413 8,170 170,830
2014 19,690 20,500 7,360 171,640
2015 19,690 20,597 6,453 172,547
2016 19,690 20,706 5,437 173,563
2017 19,690 20,828 4,299 174,701
2018 19,690 20,964 3,025 175,975
2019 19,690 21,117 1,598 177,402
2020 19,690 21,288   179,000

(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. Waterway 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

 

 

 

 

 

 

 

 

 

 
manish jayant 10-Sep-2020

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