Reference no: EM131561750

1. (Amortization Schedule-Straight-Line) Devon Harris Company sells 10% bonds having a maturity value of $2,000,000 for $1,855,816. The bonds are dated January 1, 2014, and mature January 1, 2019. Interest is payable annually on January 1.

Instructions

Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to the nearest cent.)

2. On June 30, 2006, County Company issued 12%bonds with a par value of $800,000 due in 20 years. They were issued at 98 and were callable at 104 at anydate after June 30, 2014. Because of lower interest rates and a significant change in the company's creditrating, it was decided to call the entire issue on June 30, 2015, and to issue new bonds. New 10% bondswere sold in the amount of $1,000,000 at 102; they mature in 20 years. County Company uses straight-lineamortization. Interest payment dates are December 31 and June 30.

Instructions

(a) Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2015.
(b) Prepare the entry required on December 31, 2015, to record the payment of the first 6 months' interestand the amortization of premium on the bonds.