(a)
Bonds
Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.
Straight-line amortization bond
Effective interest rate of amortization bond
Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.
To Prepare: The
(b)
To Prepare: The premium on bond amortization table schedule for the first three payments of bonds payable.
c)
To Prepare: The journal entry to record the interest and amortization of premium in 2015 and 2016.
d)
To Prepare: The balance sheet presentation for issuance of bonds at December 31, 2015 using the selling price of $104.
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