Oil 1/1/14 Dave\'s Dolphin World, LLP has issued a bond for the acquisition of a

Question

Oil 1/1/14 Dave's Dolphin World, LLP has issued a bond for the acquisition of a dolphin exhibit. The bonds are for par of $1,000,000 and sold for $980,000. They carry a coupon of 4% for 30 years payable December 31. The effective rate of interest is 4.5%. At the end of the period, all interest has been properly paid and the bond discount properly amortized. At the end of the year, all debt covenants are in compliance. Please provide the following: A workpaper that displays the account changes leading to ending balances for bond debt, interest expense, amortization of discount and classification as current or long term debt. Prepare the footnote for bond debt.

Explanation / Answer

Cash a/c                                        Dr. 980000 Discount on Bonds Payable        Dr. 20000 To Bond Payable 1000000 Interest Expenses a/c                  Dr. 40000 Discount on Bonds Payable a/c Dr. 5000 To cash a/c 45000

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