Canadian Sea R des Ltd. issues SS 00 000 of four year 4% bonds dated anuary 1 20

Question

Canadian Sea R des Ltd. issues SS 00 000 of four year 4% bonds dated anuary 1 2017. Interest is payable on anuary 1 and uly 1 each eat. The proceeds realized to n the issue were he ss.062-1es price less the $50,000 fee charged by Sea's lawyens. Sea's year-end is December 31 Required: Prepare entries for a. The issuance of the bonds. b. Payment of interest and related amortization on July 1, 2015 c Accrual of interest and related amortization on December 31, 2015 The net proceeds (PV) to Blue Sky are $8,479,082 ($8,529,082-$50,000); N . 8 (4 x 2); PMT-S160,000 (s,000,000 x 8% x 6/12) . 8 N, 8,479,082 +/. PV, 8000000 FV, 160000 PNT, CPT UY I/Y . 1.201 % (rounded) Accounts titles might be used:Cash, Interest payable, Bond payable, Interest expense) ? ?? 1???? ?? Joumal entry on issuance (lan. 1, 2017) CASH BONDSPAYABLE ??:?? 2Jo 9479082 Joumal entry on interest payment date (July 1, 2017) NTERESTEXPENSE BONDSPAYBLE CASH ? ??: 3. Joumal entry at year-end (Dec. 31, 2017) NTERESTEXPENSE BONDSPAYABLE INTERESTPAYABLE

Explanation / Answer

1)

Particular

Debit

Credit

Cash

$8,479,082.00

Bonds issuance cost

$50,000.00

Premium on bonds payable

$529,082.00

Bonds payable

$8,000,000.00

2)

Particular

Debit

Credit

Bond Interest Expense

$100,114.75

Premium on Bonds Payable

$66,135.25

Bond Issuance Cost

$6,250.00

Cash

$160,000.00

3)

Particular

Debit

Credit

Bond Interest Expense Payable

$160,000.00

Bond Interest Expense

$87,614.75

Amortization of Premium on bonds payable

$66,135.25

Bond Issuance Cost

$6,250.00

Particular

Debit

Credit

Cash

$8,479,082.00

Bonds issuance cost

$50,000.00

Premium on bonds payable

$529,082.00

Bonds payable

$8,000,000.00

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