Question

On June 30, 2020, Oriole Limited issued $5 million of 20-year, 12% bonds for $5,401,136, which provides a yield of 11%. The company uses the effective interest method to amortize any bond premium or discount. The bonds pay semi-annual interest on June 30 and December 31.

Partially correct answer iconYour answer is partially correct.

Prepare the journal entries to record the following transactions: (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

1.		The issuance of the bonds on June 30, 2020
2.		The payment of interest and the amortization of the premium on December 31, 2020
3.		The payment of interest and the amortization of the premium on June 30, 2021
4.		The payment of interest and the amortization of the premium on December 31, 2021

Date	Account Titles and Explanation	Debit	Credit
June 30, 2020	enter an account title for the journal entry on June 30	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on June 30	enter a debit amount	enter a credit amount
Dec. 31, 2020	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
June 30, 2021	enter an account title for the journal entry on June 30	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on June 30	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on June 30	enter a debit amount	enter a credit amount
Dec. 31, 2021	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount

eTextbook and Media

List of Accounts

  Show the proper presentation for the liability for bonds payable on the December 31, 2020 SFP. (Round answer to 0 decimal places, e.g. 5,275.)

Oriole Limited Statement of Financial Position (Partial) choose the accounting period                                                                      For the Year Ended December 31, 2020December 31, 2020For the Quarter Ended December 31, 2020
select an opening section name                                                                      Total Current AssetsTotal LiabilitiesTotal AssetsLong-term LiabilitiesTotal Long-term LiabilitiesTotal Non-current LiabilitiesTotal Partners' EquityTotal Intangible AssetsCurrent LiabilitiesTotal Liabilities and Partners' EquityProperty, Plant, and EquipmentTotal Current LiabilitiesCurrent AssetsLong-term debt InvestmentsPartners' EquityTotal Long-term InvestmentsIntangible AssetsTotal Property, Plant and Equipment
enter a balance sheet item		$enter a dollar amount

  

What amount of interest expense is reported for 2020?

Interest expense to be reported

$enter a dollar amount of Interest expense to be reported

  

What is the total cost of borrowing over the life of the bond? (Round answer to 0 decimal places, e.g. 5,275.)

Total cost of borrowing over the life of the bond

$enter the Total cost of borrowing over the life of the bond in dollars rounded to 0 decimal places

Answer 1

1.)	Date	Account Titles and Explanation	Debit $	Credit $
	June 30, 2020	Cash	5,401,136
		Bond Payable		5,000,000
		Premium on Bond payable		401,136
	Dec.31,2020	Interest Expense ( 5,401,136 x 11% x 1/2 )	297,062
		Premium on Bond payable	2,938
		Cash ( 5,000,000 x 12% x 1/2 )		300,000
	June 30, 2021	Interest Expense ( 5,401,136 - 2,938 ) x 11% x 1/2	296,901
		Premium on Bond payable	3,099
		Cash ( 5,000,000 x 12% x 1/2 )		300,000
	Dec.31,2021	Interest Expense ( 5,401,136 - 2,938 - 3,099 ) x 11% x 1/2	296,730
		Premium on Bond payable	3,270
		Cash ( 5,000,000 x 12% x 1/2 )		300,000

2.)	Statement of Financial Position (Partial)
	As at December 31,2020
			Amount $
	Non-Current liabilities
	Bond Payable	5,000,000
	Add: Premium on Bond payable ( 401,136 - 2,938 )	398,198
	Bond Payable Carrying amount		5,398,198
3.)	Amount of interest expense is reported for 2020	$ 297,062

4.)		Amount $
	Total Cash interest payable	12,000,000	=5000000*12%*20
	Less: Premium on Bond Payable	401,136
	Total cost of borrowing over the life of the bond	11,598,864