WP4.1
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(Analysis of Amortization Schedule and Interest Entries)
The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2006, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.
Amortization Schedule
Year
Cash
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Interest
Amount
Unamortized
Book Value
1/1/2006
$16,280
$8,362
$139,638
2006
16,280
$16,757
7,885
140,115
2007
16,280
16,814
7,351
140,649
2008
16,280
16,878
6,753
141,247
2009
16,280
16,950
6,083
141,917
2010
16,280
17,030
5,333
142,667
2011
16,280
17,120
4,493
143,507
2012
16,280
17,221
3,552
144,448
2013
16,280
17,334
2,498
145,502
2014
16,280
17,460
1,318
146,682
2015
16,280
17,598
148,000
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Indicate whether the bonds were issued at a premium or a discount?
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Is the amortization schedule based on the straight-line method or the effective interest method?
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Determine the stated interest rate and the effective interest rate.
Stated Rate
%
Effective Rate
%
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On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2006.
(List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Date
Description/Account
Debit
Credit
01/01/06
|
|
On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2006. (Interest is paid January 1.)
(List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Date
Description/Account
Debit
Credit
12/31/06
|
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On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2013. Capulet Corporation does not use reversing entries.
(List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Date
Description/Account
Debit
Credit
01/01/13
12/31/13
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Discount
Effective interest
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