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Homework answers / question archive / On January 1, 2020, Skysong Inc
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On January 1, 2020, Skysong Inc. sold 14% bonds having a maturity value of $700,000 for $750,469, which provides the bondholders with a 12% yield. The bonds are dated January 1, 2020, and mature on January 1, 2025, with interest payable on January 1 of each year. The company follows IFRS and uses the effective interest method. Prepare a schedule of interest expense and bond amortization for 2020 through 2023. Schedule of Interest Expense and Bond Premium Amortization |
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| Date | Credit Cash |
Debit Interest Expense |
Debit Bonds Payable |
Carrying Amount of Bonds |
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| 1/1/20 | |||||||||
| 1/1/21 | |||||||||
| 1/1/22 | |||||||||
| 1/1/23 | |||||||||
Based on the information available in the question, we can answer as follows:-
| Date | Credit Cash | Debit Bond Interest expense | Debit Bonds Payable | Carrying amount of Bonds |
| 01/01/20 | 750,469.00 | |||
| 01/01/21 | 98,000 | 90,056.28 | (7,943.72) | 742,525.28 |
| 01/01/22 | 98,000 | 89,103.03 | (8,896.97) | 733,628.31 |
| 01/01/23 | 98,000 | 88,035.40 | (9,964.60) | 723,663.71 |
Credit cash is calculated as follows :- $700,000 * 14% = $98,000
Interest expense :- Carrying amount of Bonds * Yield :- For example 01/01/21 :- $750,469 * 12% = $90,056.28
