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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(Round intermediate calculations to 6 decimal places,
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