Grocery Corporation received $322,828 for 12.00 percent bonds issued on January

Question

Grocery Corporation received $322,828 for 12.00 percent bonds issued on January 1, 2015, at a market interest rate of 9.00 percent. The bonds had a total face value of $270,000, stated that interest would be paid each December 31, and stated that they mature in 10 years. Required: Complete the following table for each account by indicating (a) whether it is reported on the Balance Sheet (B/S) or Income Statement (l/S); (b) the dollar amount by which the account increases, decreases, or does not change (0) when Grocery Corporation issued the bonds; and (c) the direction of change in the account [increase, decrease, or no change] when Grocery Corporation records the interest payment on December 31. (a) Financial Statement (c) Interest Paid Account (b)Issuance Bonds Payable Discount on Bonds Payable Interest Expense Premium on Bonds Payable

Explanation / Answer

Account (a) Financial Statement (b) Issuance (c) Interest Paid Bonds Payable B/S 270000 No change Discount on Bonds Payable B/S 0 No change Interest Expense I/S 0 Increase Premium on Bonds Payable B/S 52828 Decrease

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