Answer:
Bond issue:
Dr cash $63,660
Cr Bonds payable $56,000
Cr Premium on bonds payable $7,660
Interest payment:
Dr Interest expense $1,273.2
Dr Premium on bonds payable $126.8
Cr Cash $1,400
Explanation:
The bond issue brought about cash proceeds of $63,660 which implies that the bonds were issued at a premium of $7660 ($63,660-$56,000) above the par value of $56,000.This means that cash account would be debited with $63,660 while bonds payable and premium on bonds payable would be credited with $56,000 and $7660 respectively.
The interest payment=$56,000*5%*6/12=$1400
interest expense=$63,660*4%*6/12=$1273.2
The premium amortization=interest payment -interest expense
=$1400-$1273.2 =$126.8
Answer:
cash 63,660 debit
bonds payable 56,000 credit
premium on BP 7,660 credit
--to record issuance--
interest expense 1,273.5 debit
premiun on BP 318.3 debit
cash 1,591.5 credit
--to record June 30th 2021 interest payment--
Explanation:
the cash received will be debited while the bonds liabiltiy credit.
The difference as we receive above face value will be considered a premium and is a credited as well.
The interest expense will be the carrying value times market rate:
63,660 x 4% x 1/2 = 1,273.2
Then, we calculate the actual cash outlay:
63,660 x 5% x 1/2 = 1,591.5
The difference adjust the premium on BP : 1,591.5 - 1,273.2 = 318.3
