Bond Payable: On 7/1/14, Sasha issued $ 2,000,000 12% bonds, maturing in 5 years with a yield of 10%, compounded semi-annually. The bonds pay interest semi-annually on June 30 and December 31 of each year. The bonds are to be accounted for under the effective interest method. Round to the nearest dollar. If possible can you do this in excel?
At what amount were the bonds issued? __________
a. Prepare a well-labeled schedule (with debits/credits shown) for the journal entries through the life of the Bond.
b. Prepare the original Journal Entry to record the issue of the Bond
c. Prepare the Journal Entry to record the 12/31/15 Interest related to the Bond
Calculation of Bond Issue Price:
Face Value of Bond | 2000000 |
Coupon Rate | 12% |
Semi Annual Interest Payments | 120000 |
Bond Maturity (Years) | 5 |
PVIFA @ 5% for 10 semiannual Years | 7.7217 |
PV of Interest Payments (A) | 9,26,608 |
PVIF @ 5% for 10 semi annual years | 0.613913254 |
PV of Bond Maturity (B) | 12,27,827 |
Bond Issue Price = (A) + (B) | 21,54,435 |
Bond Amortisation Schedule:
Semi Annual Years | Opening Value | Interest Expense @ 5% | Interest Payment @ 6% & Bond Repay 10th year | Amortisation of Premium | Closing Balance |
Debit | Credit | Debit | |||
31-12-2014 | 21,54,435 | 1,07,722 | 1,20,000 | 12,278 | 21,42,156 |
30-06-2015 | 21,42,156 | 1,07,108 | 1,20,000 | 12,892 | 21,29,264 |
31-12-2015 | 21,29,264 | 1,06,463 | 1,20,000 | 13,537 | 21,15,727 |
30-06-2016 | 21,15,727 | 1,05,786 | 1,20,000 | 14,214 | 21,01,514 |
31-12-2016 | 21,01,514 | 1,05,076 | 1,20,000 | 14,924 | 20,86,590 |
30-06-2017 | 20,86,590 | 1,04,329 | 1,20,000 | 15,671 | 20,70,919 |
31-12-2017 | 20,70,919 | 1,03,546 | 1,20,000 | 16,454 | 20,54,465 |
30-06-2018 | 20,54,465 | 1,02,723 | 1,20,000 | 17,277 | 20,37,188 |
31-12-2018 | 20,37,188 | 1,01,859 | 1,20,000 | 18,141 | 20,19,048 |
30-06-2019 | 20,19,048 | 1,00,952 | 21,20,000 | 19,048 | - |
Journal Entries:
Journal Entry on Issue of Bond on 01/07/2014 | ||
Debit | Credit | |
Bank A/c | 21,54,435 | |
12% Bonds Payable | 20,00,000 | |
Premium on issue of Bond | 1,54,435 | |
Journal Entry on payment of Interest on 31st Dec 2015 | ||
Debit | Credit | |
Interest Expense | 1,06,463 | |
Premium on issue of Bond | 13,537 | |
Bank A/c | 1,20,000 | |
Bond Payable: On 7/1/14, Sasha issued $ 2,000,000 12% bonds, maturing in 5 years with a...
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