Question
In the top table, why premium on bonds payable and bonds payable is debit
whereas in the first interest payment, premium kn bonds payable is credit?
Please explain
thanks
est ethod Cash anding interest interest MAR 1/11 Sep 1/11 MAE 1/12 Sep 1/12 MF 1/13 Sep 1/13 ME 1/14 TO OD 100 1 140 145. 30
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Answer #1

At the time of issuance of bonds, the cash account is debited for the proceeds received from the issue and the bonds payable and any premium on bonds payable is credited as it is a liability. The premium on bonds payable is then amortized over the life of the bonds by debiting the premium on bonds payable account so that at the time of maturity of bonds, the balance in the premium on bonds payable account is nil. On date of maturity, the face value of the bonds is repaid by debiting bonds payable as it is the discharge of the liability and cash account is credited.

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