Homework Answers
| Price of the bonds = 20000000/1.023^40+20000000*2.5%*(1.023^40-1)/(0.023*1.023^40) = | $ 2,10,38,794 | ||
| ENTRIES [EFFECTIVE INTEREST RATE METHOD] | |||
| Jan 31, 20x1 | Cash | $ 2,10,38,794 | |
| Premium on bonds payable | $ 10,38,794 | ||
| Bonds payable | $ 2,00,00,000 | ||
| [To record issued of bonds at a premium] | |||
| Jun 30, 20x1 | Interest expense [21038794*2.3%] | $ 4,83,892 | |
| Premium on bonds payable | $ 16,108 | ||
| Cash [20000000*2.5%] | $ 5,00,000 | ||
| [To record payment of interest] | |||
| Dec 31, 20x1 | Interest expense [(21038794-16108)*2.3%] | $ 4,83,522 | |
| Premium on bonds payable | $ 16,478 | ||
| Cash [20000000*2.5%] | $ 5,00,000 | ||
| [To record payment of interest] |
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