Date | Accounting titles & Explanations | Debit | Credit | ||||||
1) | 1-Jul | Cash | 31,951,110 | ||||||
Premium on bonds payable | 1,951,110 | ||||||||
Bonds payable | 30,000,000 | ||||||||
2) | 31-Dec | interest expense | 1402445 | ||||||
Premium on bonds payable | (1,951,110/20) | 97556 | |||||||
Cash | (30,000,000*10%*1/2) | 1500000 | |||||||
30-Jun | interest expense | 1402445 | |||||||
Premium on bonds payable | 97556 | ||||||||
Cash | 1500000 | ||||||||
3) | total interest expense for year 1 | 1402445 | |||||||
4) | yes | ||||||||
5) | n = | 4.5% | |||||||
t = | 20 | ||||||||
for principal use PV of $1 at 4.5% for 20 years | |||||||||
for interest use PV of ordinary annuity at 4.5% for 20 years | |||||||||
principal | |||||||||
30,000,000*.41464 = | 12439200 | ||||||||
interest paid | |||||||||
1,500,000*13.00794= | 19511910 | ||||||||
bonds issue price | 31,951,110 | ||||||||
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