20X3

Jul-01 Interest Expense 104,974 Payment

Premium on bond 15,026 Effective interest
Cash 120,000 Amortization of prem
Payment of interest

Bonds Payable 2,000,000

Premium on bonds 84,449
Cash 1,920,000
Gain on retirement 164,449
Retirement

BB

Face amount 1,000,000

Premium on bonds 62,000
PV 5/1/99 1,062,000 EB

Payment 55,000
Effective interest -53,100
Amortization 1,900

20x1
Sales 10,000,000
X Warranty cost % 0.06
Warranty Cost 600,000 reliable estimate

Warranty Expense 600,000

Warranty Payable 600,000
Provision for warranty Actual cost/payment

Warranty Payable 400,000 EB

Cash 200,000
Inventory 150,000
Accumulated Depreciation 50,000
Actual warranty cost
 120,000 Total cash proceeds 2,040,000
-104,974 Less: Accrued interes -120,000
15,026 Payment for the bond 1,920,000
(principal amount)

CV of bonds 2,084,449
Cash -1,920,000
Gain on retirement 164,449
Discount on bonds
96,074 28,471 CV of bonds 1,964,285 (2,000,000-35,714)
31,888 Stocks 1,600,000
35,714 EB unamortGain- Share Prem 364,285
35,714

Premium on bonds
1,900 62,000
60,100

Warranty Payable
160,000 BB
400,000 600,000 Provision Beg balance 160,000
500,000 720,000 Add: Provisions
580,000 20X1 600,000
20X2 720,000
Less: Actual Cost 20x -400,000
End bal -580,000
Actual Cost 20X2 500,000