Please provide the journal entries for each bond at its issuance, and for the fi
ID: 2459459 • Letter: P
Question
Please provide the journal entries for each bond at its issuance, and for the first interest payment. The price that the bonds will be issued at the given present value.
1 Inputs Column1 Bond A Bond B Bond C 3/15/2016 1,750,000.00 6/15/2026 11% 15% 9/30/2016 11/15/2016 3 Issuance Date 4 Face Value 5 Maturity Date 6 StatedRate 7Market Rate 8 Payment Frequency 9 Type 10 11 Calculations 12 13 14 Rate 15 Nper 16 Payment 17 FV 18 Type 19 20 Present Value $10,000,000.00$ 500,000.00 $ 11/15/202:1 12% 8% 9/30/2036 10% Semiannual Annui Annual Annui Quarterly Annui Column1 Column2 Column3 Column4 8.00% 3.75% 41 5.00% 40 $ 350,000.00 $ $10,000,000.00$ 60,000.00 $ 500,000.00 $ 48,125.00 1,750,000.00 0 $7,426,137.05 $579,854.20 $1,386,489.33Explanation / Answer
Answer 1. Calulation of Discount on Issue of Bonds Market Value of Bonds payable 10,000,000.00 Proceeds from sale of Bonds 7,426,137.05 Discount on Issue of Bonds 2,573,862.95 Bond Discount Amortization Schedule Under Effective Interest Rate Method Year Interest Payment Interest Expense Discount Amortization Unamortized Discount Bond Carrying Value A = 10,000,000 X 3.5% B = Preceding Bond Carrying Value X 5% C = B-A E = 10,000,000 - D 30-09-16 2,573,862.95 7,426,137.05 31-12-16 350,000.00 371,306.85 21,306.85 2,552,556.10 7,447,443.90 Journal Entry Date Particulars Dr. Amt Cr. Amt 30/09/2016 Cash Dr. 7,426,137.05 Discount on issue of Bonds Dr. 2,573,862.95 To Bonds Payable 10,000,000.00 (Bonds issued at discount) 31/12/2016 Interest Exp Dr. 371,306.85 To Interest Payable 350,000.00 To Discount on Issue of Bonds 21,306.85 (Interest due) 31/12/2016 Interest Payable Dr. 350,000.00 To Cash 350,000.00 (Interest paid) Answer 2. Calulation of Premium on Issue of Bonds Proceeds from sale of Bonds 579,854.20 Market Value of Bonds payable 500,000.00 Premium on Issue of Bonds 79,854.20 Bond Premium Amortization Schedule Under Effective Interest Rate Method Year Interest Payment Interest Expense Premium Amortization Unamortized Premium Bond Carrying Value A = 500,000 X 12% B = Preceding Bond Carrying Value X 8% C = A-B D E = 1,200,000 + D 15/11/16 79,854.20 579,854.20 15-11-17 60,000.00 46,388.34 13,611.66 66,242.54 566,242.54 Journal Entry Date Particulars Dr. Amt Cr. Amt 15/11/2016 Cash Dr. 579,854.20 To Bonds Payable 500,000.00 To premium on Issue of Bonds 79,854.20 (Bonds issued at premium) 15/11/2017 Interest Exp Dr. 46,388.34 Premium on issue of Bonds Dr. 13,611.66 To Interest Payable 60,000.00 (Interest due) 15/11/2017 Interest Payable Dr. 60,000.00 To Cash 60,000.00 (Interest paid) Answer 3. Calulation of Discount on Issue of Bonds Market Value of Bonds payable 1,750,000.00 Proceeds from sale of Bonds 1,386,489.33 Discount on Issue of Bonds 363,510.67 Bond Discount Amortization Schedule Under Effective Interest Rate Method Year Interest Payment Interest Expense Discount Amortization Unamortized Discount Bond Carrying Value A = 1750,000 X 2.75% B = Preceding Bond Carrying Value X 3.75% C = B-A E = 10,000,000 - D 15-03-16 363,510.67 1,386,489.33 15-06-16 48,125.00 51,993.35 3,868.35 359,642.32 1,390,357.68 Journal Entry Date Particulars Dr. Amt Cr. Amt 15-03-16 Cash Dr. 1,386,489.33 Discount on issue of Bonds Dr. 363,510.67 To Bonds Payable 1,750,000.00 (Bonds issued at discount) 15-06-16 Interest Exp Dr. 51,993.35 To Interest Payable 48,125.00 To Discount on Issue of Bonds 3,868.35 (Interest due) 15-06-16 Interest Payable Dr. 48,125.00 To Cash 48,125.00 (Interest paid)
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