Respuesta :
Answer:
Date Interest Interest Amortization Bond's
payment expense bond premium book value
Jan. 1, 2021 856,850
June 30, 2021 32,000 29,157.50 2,842.50 854,007.50
Dec. 31, 2021 32,000 29,157.50 2,842.50 851,165
Assuming you are using a straight line amortization of bond premium, then the amortization per coupon payment = $56,850 / 20 = $2,842.50
January 1, 2021, bonds are issued
Dr Cash 856,850
Cr Bonds payable 800,000
Cr Premium on bonds payable 56,850
June 30, 2021, first coupon payment
Dr Interest expense 29,157.50
Dr Premium on bonds payable 2,842.50
Cr Cash 32,000
December 31, 2021, second coupon payment
Dr Interest expense 29,157.50
Dr Premium on bonds payable 2,842.50
Cr Cash 32,000
If the company uses the effective interest method, the numbers vary a little:
amortization of bond premium on first coupon payment:
($856,850 x 3.5%) - ($800,000 x 4%) = $29,989.75 - $32,000 = -$2,010.25 ≈ -$2,010
Journal entry to record first coupon payment:
Dr Interest expense 29,990
Dr Premium on bonds payable 2,010
Cr Cash 32,000
amortization of bond premium on second coupon payment:
($854,840 x 3.5%) - ($800,000 x 4%) = $29,919.40 - $32,000 = -$2,080.60 ≈ -$2,081
Journal entry to record second coupon payment:
Dr Interest expense 29,919
Dr Premium on bonds payable 2,081
Cr Cash 32,000
1. Filling in the blanks of the Amortization Schedule is as follows:
Amortization Schedule (Semi-annual):
Date Interest Interest Amortization Bond's
Payment Expense Bond premium Book value
Jan. 1, 2021 $856,850
June 30, 2021 $32,000 $29,990 2,010 $854,840
Dec. 31, 2021 $32,000 $29,919 2,081 $852,759
2. Journal Entries:
January 1, 2021:
Debit Cash $856,850
Credit Bonds Payable $800,000
Credit Bonds premium $56,850
- To record the issuance of bonds at a premium.
June 30, 2021:
Interest Expense $29,990
Amortization of Bonds Premium $2,010
Cash $32,000
- To record the first interest payment and bonds amortization.
December 31, 2021:
Interest Expense $29,919
Amortization of Bonds Premium $2,081
Cash $32,000
- To record the second interest payment and bonds amortization.
Data and Calculations:
Face value of bonds on January 1, 2021 = $800,000
Bonds proceeds = $856,850
Bonds premium = $56,850 ($856,850 - $800,000)
Coupon interest rate = 8%
Maturity period = 10 years
Interest payment = June 30 and December 31
Market interest rate = 7%
June 30, 2021:
Cash payment = $32,000 ($800,000 x 8% x 1/2)
Interest Expense = $29,990 ($856,850 x 7% x 1/2)
Amortization of Premium = $2,010 ($32,000 - $29,990)
Carrying value of bonds = $854,840 ($856,850 - $2,010)
December 31, 2021:
Cash payment = $32,000 ($800,000 x 8% x 1/2)
Interest Expense = $29,919 ($854,840 x 7% x 1/2)
Amortization of Premium = $2,081 ($32,000 - $29,919)
Carrying value of bonds = $852,759 ($854,840 - $2,081)
June 30, 2022:
Cash payment = $32,000 ($800,000 x 8% x 1/2)
Interest Expense = $29,847 ($852,759 x 7% x 1/2)
Amortization of Premium = $2,153 ($32,000 - $29,847)
Carrying value of bonds = $850,606 ($852,759 - $2,153)
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