|
|
|
|
4,500,000 | ||||||||
(A) | (b) | c=a-b | d=CV -c | |||||
6.50% | 6% | |||||||
Date | Cash | interest | premium | Carrying | ||||
expense | amortized | value | ||||||
6/30/2017 | 4,838,533 | |||||||
12/31/2017 | 292500 | 290312 | 2188 | 4,836,345 | ||||
6/30/2018 | 292500 | 290181 | 2319 | 4,834,026 | ||||
12/31/2018 | 292500 | 290042 | 2458 | 4,831,567 | ||||
a) | ||||||||
1) | Journal Entries | |||||||
Date | Account titles & Explanations | Debit | Credit | |||||
6/30/2017 | Cash | 4,838,533 | ||||||
premium on bonds payable | 338,533 | |||||||
Bonds payable | 4,500,000 | |||||||
2) | 12/31/2017 | interest expense | 290312 | |||||
premium on bonds payable | 2188 | |||||||
cash | 292500 | |||||||
3) | 6/30/2018 | interest expense | 290181 | |||||
premium on bonds payable | 2319 | |||||||
cash | 292500 | |||||||
4) | 12/31/2018 | interest expense | 290042 | |||||
premium on bonds payable | 2458 | |||||||
cash | 292500 | |||||||
b) | Balance Sheet (Partial ) | |||||||
As on December 31,2018 | ||||||||
Long term liabilities | ||||||||
Bonds payable | 4,500,000 | |||||||
Add:premium on bonds | 331,567 | 4,831,567 | ||||||
c) | ||||||||
1) | Amount of interest expense reported for 2018 | 580222 | ||||||
2) | Greater | |||||||
3) | total cost of borrowing | 11361467 | ||||||
total cash paid | ||||||||
bonds payable | 4,500,000 | |||||||
interest paid (4,500,000*13%*20) | 11700000 | 16200000 | ||||||
Cash received at time of issue | -4,838,533 | |||||||
total cost of borrowing | 11361467 | |||||||
4) | Same |
Exercise 14-9 On June 30, 2017, Vaughn Company issued $4,500,000 face value of 13%, 20-year bonds...
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