On June 30, 2017, Crane Company issued $4,300,000 face value of 13%, 20-year bon
ID: 2432330 • Letter: O
Question
On June 30, 2017, Crane Company issued $4,300,000 face value of 13%, 20-year bonds at $4,623,487, a yield of 12%. Crane uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
(1)The issuance of the bonds on June 30, 2017.
(2)The payment of interest and the amortization of the premium on December 31, 2017.
(3)The payment of interest and the amortization of the premium on June 30, 2018.
(4)The payment of interest and the amortization of the premium on December 31, 2018.
Explanation / Answer
Total Premium on bonds payable (4623487-4300000): 323487 Semi annual cashh interest (4300,000*13%*6/12) 279,500 Amort chart Date Cash Interest Premium Unamortize Book Value Interest Expense Amortized Premium at the end 30.06.17 323,487 4,623,487 31.12.17 279500 277409 2091 321,396 4,621,396 30.06.18 279500 277284 2216 319,180 4,619,180 31.12.18 279500 277151 2349 316,831 4,616,831 Journal entries: Date Accounts title and explanation Debit $ Credit $ 30.06.17 Cash account Dr. 4,623,487 Bonds payable Account 4,300,000 Premium on Bonds payable Account 323,487 31.12.17 Interest expense Account Dr. 277409 Premium on bonds payable Account Dr. 2091 Cash account 279500 30.06.18 Interest expense Account Dr. 277284 Premium on bonds payable Account Dr. 2216 Cash account 279500 31.12.18 Interest expense Account Dr. 277151 Premium on bonds payable Account Dr. 2349 Cash account 279500
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.