In each of the following independent cases the company

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Reference no: EM13454567

In each of the following independent cases the company closes its books on December 31.

(1) Sanford Co. sells $500,000 of 10% bonds on March 1, 2012. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2015. The bonds yield 12%. Give entries through December 31, 2013.

(2) Titania Co. sells $400,000 of 12% bonds on June 1, 2012. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2016. The bonds yield 10%. On October 1, 2013, Titania buys back $120,000 worth of bonds for $126,000 (include accrued interest) Give entries through December 1, 2014.

Instructions:

For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective-interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. Assume that no reversing entries were made.)

Reference no: EM13454567

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