Question

On June 1, 2019, Marigold Company sold $2,520,000 in long-term bonds for $2,210,300. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective interest method. your answer is correct. Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. (Please round interest expense and bond discount columns to zero decimal places.) Date Credit Cash Debit Interest Expense Credit Bond Discount Carrying Amount of Bonds 6/1/19 2,210,300 201600 221030 19430 2229730 5/31/20 5/31/21 17 5/31/22 201600 222973 21373 2251103 201600 225110 23510 2274613 5/31/23 201600 227461 25861 2300474 SHOW LIST OF ACCOUNTS SHOW ANSWER LINK TO TEXT Your answer is partially correct. Assuming that interest and discount amortization are recorded each May 31, prepare the adjusting entry to be made on December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31 TInterest Expense 222973 222973) T Discount on Bonds Paya 21373 Interest Payable 201600

Answer 1

Adjusting Entry on Dec 31,2021:

Date	Account titles and Explanation	Debit	Credit
Dec.31,2021	Interest expense	$131,314
	Discount on bonds payable		$13,714
	Interest payable		$117,600
	[To record accrued interest expense]

Calculations:

Interest to be calculated for 7 months [May 31,2021 to Dec 31,2021]

i.Interest expense = Carrying value at 5/31/2021 x Market rate x 7/12

=$2,251,103 x 10% x 7/12

=$131,314

ii.Interest payable = Face value x Stated rate x 7/12

= $2,520,000 x 8% x 7/12

=$117,600

iii.Discount on bonds payable = Interest expense - Interest payable

=$131,314-$117,600

=$13,714