P15-6A P15-6A Pa bonds were dated the straight-line method at 104 ris Electric s

Question

P15-6A

P15-6A Pa bonds were dated the straight-line method at 104 ris Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2017 The January 1 and pay interest annually on January 1. Paris Electric uses method to amortize bond premium or discount. The bonds were sold Instructions la) Prepare the journal entry to record the issuance of the bonds on January 1, 2017 b) Prepare a bond premium amortization schedule for the first 4 interest periods (c) Prepare the journal entries for interest and the amortization of the premium in 2017 and 2018. id) Show the balance sheet presentation of the bond liability at December 31, 2018.

Explanation / Answer

Req a:; Journal entry for issuance of bonds: Jan1 2017 Cash account Dr. 3120000      Bonds payable Account 3,000,000      Premium on Bonds payable 120,000 Req b: Premium on Bonds payable 120000 Number of interest periods 10 Premium amortized annually 12000 Amortization chart Year Interest Ppremium Interest Carrying Paid Amortized Expense Value at end 31.12.17 300000 12000 288000 3108000 31.12.18 300000 12000 288000 3096000 31.12.19 300000 12000 288000 3084000 31.12.20 300000 12000 288000 3072000 Req c: Journal entries for interest Date Accounts title and explanations Debit $ Credit $ 31.12.17 Interest expense Account Dr. 288000 Premium on bonds payable Dr. 12000      Interest payable 300000 01.01.18 Interest payable Dr. 300000      Cash account 300000 31.12.18 Interest expense Account Dr. 288000 Premium on bonds payable Dr. 12000      Interest payable 300000 01.01.19 Interest payable Dr. 300000      Cash account 300000 Req d: Current Liability: Interest payable 300000 Long term liability: Bonds payable(Gross) 3,000,000 Add: Premium on bonds 96000 (120000-24000) Bonds payable 3096000

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