(Solution) - Amity Construction Company registered 100 000 of 6 bonds on Ju -(2025 Original AI-Free Solution)

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Academic Level: Undergrad. (yrs 3-4)

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Amity Construction Company registered $100,000 of 6% bonds on July 1, 2012. The maturity date of the bonds is January 1, 2022. Interest is payable January 1 and July 1. The bonds were sold at 105.7 on July 1, 2012. The company uses the straight-line method of amortizing bond premiums and discounts.
Required:
1. Make the required journal entries for each of the following dates:
a. July 1, 2012
b. December 31, 2012
c. January 1, 2013
d. July 1, 2013
2. Because of a substantial increase in the market rate of interest, Amity Construction
Company purchased all the bonds on the open market at face value (100) on July 1,
2015. The following entry had just been made on that day:
Bond Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700
Premium on Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Made semiannual interest payment on the bonds and amortized bond premium for six months. Prepare the journal entry to record the retirement of the bonds on July 1, 2015.