Solution to extra problem bond

1)

a) June 1, 2016 Cash $60,300,000

Discount on B/P 1,200,000
Bonds payable $ 60,000,000
Bonds Interest Payable (60M x 10% x3/12) 1,500,000

b) Sep 1, 2016 Bonds Interest expense 1,515,190

Bonds interest payable 1,500,000
Discount on B/P (1,200,000 x 3/237) 15,190
Cash (60M x 10% x6/12) 3,000,000

c) Dec31, 2016 Bond Interest expense 2,020,253

Discount on B/P (1,200,000 x 4/237) 20,253
Bonds interest payable (60M x 10% x4/12) 2,000,000

d) Partial Balance Sheet

December 31, 2020

Long term Liabilities:

Bonds Payable $ 60,000,000
Deduct: Discount on B/P 921,519* $59,078,481
* $1,200,000 x 55/237=$278481 (amortization for a period of 4 years and 7 month
Unamortized discount= $1,200,000-$278,481= $921,519
2)
a) June 1, 2016 Cash $62,100,000
Premium on B/P $600,000
Bonds payable 60,000,000
Bonds Interest Payable (60M x 10% x3/12) 1,500,000

b) Sep 1, 2016 Bonds Interest expense 1,492,406

Bonds interest payable 1,500,000
Premium on B/P (600,000 x 3/237) 7,594
Cash (60M x 10% x6/12) 3,000,000

1
c) Dec31, 2016 Bond Interest expense 1,989,874

Premium on B/P (600,000 x 4/237) 10,126

Bonds interest payable (60M x 10% x4/12) 2,000,000

d) Partial Balance Sheet

December 31, 2020
Long term Liabilities:
Bonds Payable $ 60,000,000
Add: Premium on B/P 460,760* $60,460,760
* $600,000 x 55/237=$139,240 (amortization for a period of 4 years and 7 months)
Unamortized premium= $600,000-$139,240= $460,760