Exercise 144 Marin Inc issued 817000 of 1050 19year bonds on

Exercise 14-4 Marin Inc. issued $817,000 of 10.50%, 19-year bonds on January 1, 2017 at 101, Interest is payable semi- annually on July 1 and January 1. Marin Inc. uses the effective interest method of amortization for any bond premium or discount. Assume an effective yield of 9.80%. (with a market rate of 9.80%, the issue price would be slightly higher. For simplicity, ignore this.) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account titles and enter O for the amounts.) 17 Prepare the journal entry to record the payment of interest and the related amortization on July 1, 2017. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account titles and enter O for the amounts.) Debit Credi /L/L Prepare the journal entry to record the accrual of interest and the related amortization on December 31, 2017. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account titles and enter O for the amounts.) Date Accsnt Titles ad Esplanatine 12/31/17

Solution

$ Face value of Bond 817000 Value per bond 100 Number of bond issued = $ 817,000/100 = 8,170 bonds Issue price of the bond 101 Total value of bond issue = ( 8,170 x $ 101) 825170 Premium ( $ 825,170 - $ 817,000) 8170 Journal entries Date Account\'s tittle Debit $ Credit $ 2017 Jan-01 Cash          8,25,170 19-year bond payable          8,17,000 Bond Premium                8,170 (Issue of 10.50%,19-year bond) Jul-01 Interest expenses( $ 825,170x9.8% x 6/12)              40,433 Amortization of bond premium($42,893 - $ 40,433)                2,459 Interest Payable ( $ 817,000 x 10.5% x 6/12)             42,893 (Interest expenses for sem-annual period) Dec-31 Interest expenses{( $ 825,170 - $ 2,459)x 9.80% x 6/12)              40,313 Amortization of bond premium($42,893 - $ 40,433)                2,580 Accrued interest ( $ 817,000 x 10.5% x 6/12)             42,893 (Interest expenses for sem-annual period)