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Date | Account Titles and Explanation | Debit | Credit |
1/1/20 | Cash | $543,840 | |
Bonds payable | $528,000 | ||
Premium on bonds payable | $15,840 | ||
( To record bond issue) | |||
7/1/20 | Interest expense | $23,364 | |
Premium on bonds payable | $396 | ||
Cash | $23,760 | ||
( To record semi annual interest payment) | |||
12/31/20 | Interest expense | $23,364 | |
Premium on bonds payable | $396 | ||
Cash | $23,760 | ||
( To record semi annual interest payment) |
Par value of bonds = $528,000
Cash receipts from issue of bonds = 528,000 x 103%
= $543,840
Premium on bonds payable = Cash receipts from issue of bonds - Par value of bonds
= 543,840-528,000
= $15,840
Semi annual amortization of bonds premium = 15,840/40
= $396
Semi annual interest payment = 528,000 x 9% x 6/12
= $23,760
Kindly comment if you need further assistance. Thanks‼!
Exercise 14-04 Sandhill Company issued $528,000 of 9%, 20-year bonds on January 1, 2020, at 103....
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