Answer:
Cash 204,000 debit
Bond Payable 200,000 credit
Premium on BP 4,000 credit
--to record issuance--
interest expense 11,600 debit
premium BP 400 debit
cash 12,000 credit
--Dec 31th 2018 --
Balance sheet:
Liabilities: Bonds payable Carrying value: 203,600
Income statement: interest expense 11,600
cash flow statement: financing activities interest paid 12,000
==================================================
interest expense 11,600 debit
premium BP 400 debit
cash 12,000 credit
--Dec 31th 2019 --
Balance sheet:
Liabilities: Bonds payable Carrying value: 203,200
Income statement: interest expense 11,600
cash flow statement: financing activities interest paid 12,000
Explanation:
proceeds 204,000
face value 200,000
premium on bonds payable 4,000
amortization: premium/payment
4,000 / 10 = 400
200,000 x 6% = 12,000 cash proceed (cash flow)
amortization on premium 400
interest expense 12,000 - 400 = 11,600 (income statement)
as this is a straigh-line method each entry is the same.
