What would be the bonds payable ? (a) The issuance of the bonds: Date: January 1,...
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What would be the bonds payable ? (a) The issuance of the bonds: Date: January 1, 2020 Debit Cash ($400,000 x 102 %) Credit: Bonds Payable ($400,000+ Premium) Explanation: The cash received is $400,000 multiplied by 102%, which represents the issue price at 102% of the face value of the bonds. The premium is the difference between the cash received and the face value of the bonds. (b) The payment of interest and the related amortization on July 1, 2020: Date: July 1, 2020 Debit: Interest Expense ($400,000 x 8% x 6/12) Debit: Premium on Bonds Payable (Amortization Amount) Credit: Cash (Amount of interest payment) Explanation: The interest expense is calculated as the face value of the bonds ($400,000) multiplied by the stated interest rate (8%) multiplied by the time period (6/12 since it is paid semiannually). The amortization amount is the difference between the cash interest payment and the interest expense, representing the reduction in the bond premium. What would be the premium on bonds payable and the amount of interest payment? (c) The accrual of interest and the related amortization on December 31, 2020: Date: December 31, 2020 Debit Interest Expense ($400,000 x 8% x 6/12) Debit: Premium on Bonds Payable (Amortization Amount) Credit: Interest Payable (Amount of interest accrual) Explanation: The interest expense is calculated as the face value of the bonds ($400,000) multiplied by the stated interest rate (8%) multiplied by the time period (6/12 since it is accrued semiannually). The amortization amount is the difference between the interest expense and the cash interest payment, representing the reduction in the bond premium. What would be the premium on bonds payable and the interest payable ? What would be the bonds payable ? (a) The issuance of the bonds: Date: January 1, 2020 Debit Cash ($400,000 x 102 %) Credit: Bonds Payable ($400,000+ Premium) Explanation: The cash received is $400,000 multiplied by 102%, which represents the issue price at 102% of the face value of the bonds. The premium is the difference between the cash received and the face value of the bonds. (b) The payment of interest and the related amortization on July 1, 2020: Date: July 1, 2020 Debit: Interest Expense ($400,000 x 8% x 6/12) Debit: Premium on Bonds Payable (Amortization Amount) Credit: Cash (Amount of interest payment) Explanation: The interest expense is calculated as the face value of the bonds ($400,000) multiplied by the stated interest rate (8%) multiplied by the time period (6/12 since it is paid semiannually). The amortization amount is the difference between the cash interest payment and the interest expense, representing the reduction in the bond premium. What would be the premium on bonds payable and the amount of interest payment? (c) The accrual of interest and the related amortization on December 31, 2020: Date: December 31, 2020 Debit Interest Expense ($400,000 x 8% x 6/12) Debit: Premium on Bonds Payable (Amortization Amount) Credit: Interest Payable (Amount of interest accrual) Explanation: The interest expense is calculated as the face value of the bonds ($400,000) multiplied by the stated interest rate (8%) multiplied by the time period (6/12 since it is accrued semiannually). The amortization amount is the difference between the interest expense and the cash interest payment, representing the reduction in the bond premium. What would be the premium on bonds payable and the interest payable ?
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1 Calculate Bonds payable Given Face value of bonds 400000 Premium received 400000 102 400000 102 40... View the full answer
Related Book For
Federal Taxation 2021 Corporations, Partnerships, Estates & Trusts
ISBN: 9780135919460
34th Edition
Authors: Timothy J. Rupert, Kenneth E. Anderson, David S. Hulse
Posted Date:
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