Question

On June 30, 2020, Mischa Auer Company issued $4,000,000 face value of 13%, 20-year bonds at $4,300,918, a yield of 12%. Auer uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

I just need help with #3 in the last part

Prepare the journal entries to record the following transactions. (Round answer to o decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (1) The issuance of the bonds on June 30, 2020. (2) The payment of interest and the amortization of the premium on December 31, 2020. (3) The payment of interest and the amortization of the premium on June 30, 2021. (4) The payment of interest and the amortization of the premium on December 31, 2021. No. Date Account Titles and Explanation Debit Credit (1) June 30, 2020 Cash T 4 ,300,918 T Bonds Payable 4,000,000 1 Premium on Bonds Pay: 300918 1 (2) December 31, 2020 TInterest Expense 258055 Premium on Bonds Payable 1945 Cash 260000 (3) June 30, 2021 Interest Expense 257938 Premium on Bonds Payable 2062 Cash 260000 (4) December 31, 2021 TT Interest Expense 257815

Answer 1

Solution 3:

Particulars	Amount
Amount Repaid:
30 payments of ($4,000,000*13%*6/12=) $260,000 each	$1,04,00,000
Par Value at Maturity	$40,00,000
Total Repaid	$1,44,00,000
Less: Amount borrowed	$43,00,918
Total cost of borrowing over life of the bond	$1,00,99,082