PROBLEM II (50%) Koresh Corp. issued $5,000,000, 6%, 10-year bonds, dated April 1, with interest payment...

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PROBLEM II (50%) Koresh Corp. issued $5,000,000, 6%, 10-year bonds, dated April 1, with interest payment dates of September 3

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Answer 1

Answer #1

A. On 1st April 2019,

Bank Account Debit 4800000

Loss on issue of bonds account Debit 200000

6% 10 year bonds Credit 5000000

The loss on issue of bonds is immediately treated as expense and so there is no amortisation needed. The company is liable to pay 100 per bond and so the liability is of 100.

On 30th September 2019,

Interest expense Debit 150000

Bank account Credit 150000

On 31st December 2019,

Interest expense Debit 75000

Accrued interest account Credit 75000

B. On 1st April 2019:

Bank account Debit 5150000

6% 10 year bonds Credit 5000000

Premium on issue of bonds Credit 150000

Here premium will be a part of net worth of the company. The actual liability to the company is the bonds payable of $5000000.

On 30th September 2019,

Interest expense Debit 150000

Bank account Credit 150000

On 31st December 2019,

Interest expense Debit 75000

Accrued interest account Credit 75000

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PROBLEM II (50%) Koresh Corp. issued $5,000,000, 6%, 10-year bonds, dated April 1, with interest payment...

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