Question

On January​ 1, 2018​, Robert Unlimited issues 15​%, 15​-year bonds payable with a face value of $ 230 comma 000. The bonds are issued at 106 and pay interest on June 30 and December 31. ​(Assume bonds payable are amortized using the​ straight-line amortization​ method.)

Answer 1

(A) issuance of the bonds

cash 243,000 debit

bonds payable 230,000 credit

premium on bonds payable 13,800 credit

(B) first interest payment

premium on bond payable 460 debit

interest expense 16,790 debit

cash 17,250 credit

Step-by-step explanation:

(A)

cash proceeds face value x point issued/100

230,000 x 106/100 = 243,800

face value 230,000

premium on bond payable 13,800

(B)

first interest payment

cash proceeds:

face value x bond rate /2 (because, there are 2 payment per year)

230,000 x 15% / 2 = 17,250

amortization on the bonds

premium/ total payment

15 years x 2 payment per year = 30 payment

13,800/30 = 460 amortizatioonper payment

interest expense

cash proceeds - amortization

17,250 - 460 = 16,790‬