Answer: | |||||
a) Amortization table for 2 Years | |||||
Caculation of Issue Price = ($ 600000 /100)*103 | |||||
= | $ 7,80,000 | ||||
Less: Face Value | $ 6,00,000 | ||||
Premium | $ 1,80,000 | ||||
Amortization Per year under Straight Line method = $ 1,80,000/5 | |||||
= | $ 36,000 | ||||
Year | Cash Interest | Amortization | Interest Expenses | Carrying value | |
0 | $ 7,80,000 | ||||
1 | $ 48,000 | $ 36,000 | $ 12,000 | $ 7,44,000 | |
2 | $ 48,000 | $ 36,000 | $ 12,000 | $ 7,08,000 | |
b) Entry for Issuance of Bonds Payable | |||||
Account Tittle | Debit | Credit | |||
Cash A/c | $ 7,80,000 | ||||
Premium on Bond A/c | $ 1,80,000 | ||||
8% Bonds Payable A/c | $ 6,00,000 | ||||
c) Interest Payment on December 01,2018 | |||||
Account Tittle | Debit | Credit | |||
Interest Expenses A/c | $ 12,000 | ||||
Premium on Bond a/c | $ 36,000 | ||||
Cash A/c | $ 48,000 | ||||
d) Journal entry for Redemption of Bonds before Maturity | |||||
Account Tittle | Debit | Credit | |||
8% Bonds Payable A/c | $ 6,00,000 | ||||
Premium on Bonds A/c | $ 1,08,000 | ||||
Cash A/c | $ 6,09,000 | ||||
Gain on Retirement of Bonds | $ 99,000 | ||||
On December 31, 2019, PT ABC issued $600,000 of 8% contractual rate, 5-year bonds at 103,...
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