Using a Premium Amortization Table (Straight Line) For Dingle Corporation, the following amortization table was prepared when
Question:
Using a Premium Amortization Table (Straight Line)
For Dingle Corporation, the following amortization table was prepared when $400,000 of 5-year, 7% bonds were sold on January 1, 2020, for $420,000.
| Cash | Interest | Premium | Premium | Carrying |
| At issue | $20,000 | $420,000 | |||
| 06/30/20 | $14,000 | $12,000 | $2,000 | 18,000 | 418,000 |
| 12/31/20 | 14,000 | 12,000 | 2,000 | 16,000 | 416,000 |
| 06/30/21 | 14,000 | 12,000 | 2,000 | 14,000 | 414,000 |
| 12/31/21 | 14,000 | 12,000 | 2,000 | 12,000 | 412,000 |
| 06/30/22 | 14,000 | 12,000 | 2,000 | 10,000 | 410,000 |
| 12/31/22 | 14,000 | 12,000 | 2,000 | 8,000 | 408,000 |
| 06/30/23 | 14,000 | 12,000 | 2,000 | 6,000 | 406,000 |
| 12/31/23 | 14,000 | 12,000 | 2,000 | 4,000 | 404,000 |
| 06/30/24 | 14,000 | 12,000 | 2,000 | 2,000 | 402,000 |
| 12/31/24 | 14,000 | 12,000 | 2,000 | 0 | 400,000 |
Required:
1. Prepare the entry to recognize the issuance of the bonds on January 1, 2020.
| 2020 Jan. 31 | Cash | ||
| Bonds Payable | |||
| Premium on Bonds Payable | |||
| Record issuance of bonds at premium |
Feedback
1. When bonds are issued, any premium or discount is recorded in a separate valuation account.
2. Prepare the entry to recognize the first interest payment on June 30, 2020.
| 2020 June 30 | Interest Expense | ||
| Premium on Bonds Payable | |||
| Cash | |||
| Record interest expense |
Feedback
2. An amortization table helps calculate the proper amortization of bond premium or discount. They are particularly helpful when the effective interest rate method is used; however, this problem amortizes the premium using the straight-line method.
3. Determine what interest expense for this bond issue Dingle will report in its 2021 income statement.
$
Feedback
3. Any premium or discount is amortized to interest expense over the life of the loan.
4. Indicate how these bonds will appear in Dingle's December 31, 2023 balance sheet.
| Dingle Corporation | ||
| Balance Sheet (partial) | ||
| December 31, 2023 | ||
| Bonds payable: | ||
| 7% Bonds, due 2024 | $ | |
| Add: Unamortized Premium on Bonds Payable | $ | |
Expert Answer:
Dingle Corporation Bond Amortization Analysis 1 Entry to Recognize Bond Issuance January 1 2020 Cash 420000 Bonds Payable 400000 Premium on Bonds Paya... View the full answer
