A1311 Bond Issued Between Interest Dates Return to the facts

A13-11 Bond Issued Between Interest Dates: Return to the facts of Assignment 13-9. The bond is now issued on 1 August 20xi Required: 1. Calculate the issuance proceeds of the bond and acrued interest. 2. Record all entries associated with the bond for 20X1 and 20X2 3. Calculate interest expense for 20X 1 and determine the net balance of bonds payable as of 31 December 20xX1

Solution

Answer 1. Present Value at Apr-1          814,003 Present Value at Sep-30          812,753              1,250 Issuance Proceeds - $814,003 - ($1,250 X 4/6)          813,170 Accrued Interest - $21,600 X 4/6            14,400 Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. Aug 1, 20X1 Cash    827,570.00 $813,170 + $14,400 Interest Payable      14,400.00 Premium on Bonds Payable      13,170.00 Bonds Payable    800,000.00 (record the issue of bonds) Sep 30, 20X1 Interest Expense        6,783.00 $20,350 X 2/6 Premium on Bonds Payable            417.00 $1,250 X 2/6 Interest Payable      14,400.00 Cash      21,600.00 (Record the interest paid) Dec 31, 20X1 Interest Expense      10,159.00 $20,319 X 3/6 Premium on Bonds Payable            641.00 $1,281 X 3/6 Interest Payable      10,800.00 (Record the interest payable till Dec 31) Mar 31, 20X2 Interest Expense      10,160.00 Premium on Bonds Payable            640.00 Interest Payable      10,800.00 Cash      21,600.00 (Record the interest paid) Sep 30, 20X2 Interest Expense      20,287.00 Premium on Bonds Payable        1,313.00 Cash      21,600.00 (Record the interest paid) Dec 31, 20X2 Interest Expense      10,127.00 Premium on Bonds Payable            673.00 Interest Payable      10,800.00 (Record the interest payable till Dec 31)