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On January 1, 2020, Whispering Corporation issued $670,000 of 9% bonds, due in 10 years. The bonds were issued for $715,529,
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Answer #1
Date Account title Debit credit
1 Jan 2020 cash 715529
Premium on bond payable 45529
Bond payable 670000
1 July 2020 Interest expense 28621
Premium on bond payable 1529
cash 30150
31 December 2020 Interest expense 28560
Premium on bond payable 1590
Interest payable 30150

##

1 July 2020 :

Semiannual interest paid = Par value * coupon rate *n/12       [2semiannual period comprising of 6 months each]

                     = 670000*.09*6/12

                     = 30150

Semiannual interest expense:carrying value of bond* yield *n/12

                   = 715529 * .08*6/12

                  = 28621.16   (rounded to 28621 )

#

31Dec 2020:

carrying value of bond after first semiannual payment = issue price -premium amortization

                          = 715529 - 1529

                          = 714000

Semiannual interest expense = 714000 *.08 *6/12 = 28560

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