Introduction: When bonds are issued at par, debit the cash and credit the bonds payable for the bond’s par value.Bonds are issued at a premiumwhen the contract rate is higher than the market price, making the issue price greater than par.
To determine:Compute the bond interest expense over the bonds life.
Answer to Problem 4PSA
The amount of total bond interest expense is
Explanation of Solution
Total cash payments of
b.
Introduction: When bonds are issued at par, debit the cash and credit the bonds payable for the bond’s par value.Bonds are issued at a premium when the contract rate is higher than the market price, making the issue price greater than par.
To determine: Amortization table is to be prepared
b.
Answer to Problem 4PSA
Amortization table, amount check is
Explanation of Solution
Semi Annual Period End | Unamortized Premium | Carrying Value |
01/01/2016 | ||
06/30/2016 | ||
12/31/2016 | ||
06/30/2017 | ||
12/31/2017 | ||
30/06/2018 | ||
31/12/2018 | ||
30/06/2019 | ||
31/12/2019 | ||
30/06/2020 | ||
31/12/2020 |
c.
Introduction: When bonds are issued at par, debit the cash and credit the bonds payable for the bond’s par value.Bonds are issued at a premium when the contract rate is higher than the market price, making the issue price greater than par.
To determine: Prepare
c.
Answer to Problem 4PSA
Journal Entries of First two interest payment
Explanation of Solution
Date | Particular | Debit | Credit |
30/06/2016 | Bond interest expense | ||
Premium on bonds payable | |||
Cash | |||
(Being premium paid on bonds payable) | |||
31/12/2016 | Bond interest expense | ||
Premium on bonds payable | |||
Cash | |||
(Being premium paid on bonds payable) |
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Chapter 10 Solutions
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