Question

How are interest payments calculated on a $750k 20 year bond at 12% paying semiannually?

20yr = 40 semi-annual punts During two consecutive years, Antlers Company, Inc., completed the following transactions: 750,000 Year 1 June 1 Issued $750,000 face value, 20-year, 12 percent bonds, dated June 1 of this year, at 103. Interest is payable semiannually on December 1 and June 1 V Dec. 1 Paid semiannual interest on the bonds. 31 Recorded an adjusting entry for accrued interest payable. 31 Recorded an adjusting entry for amortization of premium on bonds. 31 Closed the Interest Expense account. Year 2 Jan. 1 Reversed the adjusting entry for accrued interest payable, June 1 Paid semiannual interest on the bonds. Dec. 1 Paid semiannual interest on the bonds. June 31 Recorded an adjusting entry for accrued interest payable. 31 Recorded an adjusting entry for amortization of premium on bonds. 31 Closed the Interest Expense account. 0.12=890,000/2= $45k hand interest - $750,000 payment

Straight line amortization.

Answer 1

Premium on Bond =$772,500 - $750,000 = $22,500
Interest paid in cash on Bond =$750,000*12%*6/12 =$45,000
Bond premium amortization in each period =$22,500/40 =$562.50
Interest expenses for each period =$45,000 - $562.50 =$44,437.50
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Year 1
	Jun-01	Cash	7,72,500.00
		Bonds Payable		7,50,000.00
		Premium on Bond payable		22,500.00
	Dec-31	Interest paid	45,000.00
		Cash		45,000.00
	Dec-31	Interest expenses	44,437.50
		Interest payable		44,437.50
	Dec-31	Premium on Bond payable	562.50
		Interest payable		562.50
	Dec-31	Profit and loss	44,437.50
		Interest expenses		44,437.50
	Year 2
	Jan-01	Interest payable	45000
		Cash		45000
	Jun-01	Interest paid	45,000.00
		Cash		45,000.00
	Dec-01	Interest paid	45,000.00
		Cash		45,000.00
	Jun-30	Interest expenses	44,437.50
		Interest payable		44,437.50
	Jun-30	Premium on Bond payable	562.50
		Interest payable		562.50
	Jun-30	Profit and loss	44,437.50
		Interest expenses		44,437.50