both the reported value of longt-term and periodic interest charges should be ba

Question

both the reported value of longt-term and periodic interest charges should be based on unamortized issue price (plus or minus unamortized premium discount) and initial yield.

the city of fairfield issued $100 million of 20-year,6% coupon bonds (3% per semiannual period) for $89.322 million. The price reflected a yield of 7% (3.5% per semiannual period).

1. prepare entries to reflect how to report the following in the city's government-wide statements:
a. the issuance of the bond
b. the first semiannual payment of interest
c. the second semiannual payment of interest

2. prepare entries to account for the same transactions in an appropriate government fund.


thanks for your help in this matter

Explanation / Answer

Journal entries : 1. a) Date Details Debit Credit Cash $89,322,000      Bonds Payable 89,322,000 (To record issue of coupon bonds) b) Bond Interest Expense 1,339,830        Cash 1,339,830 (To record the first semiannual interest payment(89,322,000*0.03*1/2) c) Bond Interest Expense 1,339,830      Bond Interest Payable 1,339,830 (To record second annual payment of interest expense) 2. Date Journal entries in an appropriate Debit Credit government fund. Cash 89,322,000 Discount on Bonds Payable 10,678,000    Bonds Payable 100,000,000 (TO record issue of bonds) Interest Expense 12,017,830    Discount on Bonds Payable 10,678,000    Interest Payable 1,339,830 (To record interest, and discount on bonds payable) Inteterest Payable 1,339,830    Cash 1,339,830 (To record payment of interest expense) Date Details Debit Credit Cash $89,322,000      Bonds Payable 89,322,000 (To record issue of coupon bonds)

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