On December 31, 20X1 , the Miller Company purchased $9 million of 5-year, 6% deb

Question

On December 31, 20X1 , the Miller Company purchased $9 million of 5-year, 6% debentures for $9,808,433. The market interest rate was 4%. Read the requirements. Requirement 1. Using the balance sheet equation format, prepare an analysis of transactions for the investor's records. Key your transactions as follows: (a) purchase, (b) first semiannual interest payment using effective interest amortization of bond premium, and (c) payment of maturity value. (Enter amounts in dollars, and round to the nearest whole dollar. Use a minus sign or parentheses for a decrease in an accounting equation component. Leave unused cells blank.) Assets Liabilities Stockholders' Equity Retained Earnings Investment Bonds in BondsPayablet Cash Interest Revenue Interest (a) Purchase (b) Semiannual interest (c) Maturity

Explanation / Answer

Cash Interest Expenses Amortization of Bont Premium Bond Premium Bond Payable Balance 0                    808,433.00                9,000,000.00      9,808,433.00 1                           270,000.00                    196,168.66                      73,831.34                    734,601.66                9,000,000.00      9,734,601.66 2                           270,000.00                    194,692.03                      75,307.97                    659,293.69                9,000,000.00      9,659,293.69 3                           270,000.00                    193,185.87                      76,814.13                    582,479.57                9,000,000.00      9,582,479.57 4                           270,000.00                    191,649.59                      78,350.41                    504,129.16                9,000,000.00      9,504,129.16 5                           270,000.00                    190,082.58                      79,917.42                    424,211.74                9,000,000.00      9,424,211.74 6                           270,000.00                    188,484.23                      81,515.77                    342,695.98                9,000,000.00      9,342,695.98 7                           270,000.00                    186,853.92                      83,146.08                    259,549.90                9,000,000.00      9,259,549.90 8                           270,000.00                    185,191.00                      84,809.00                    174,740.89                9,000,000.00      9,174,740.89 9                           270,000.00                    183,494.82                      86,505.18                      88,235.71                9,000,000.00      9,088,235.71 10                           270,000.00                    181,764.71                      88,235.72                              (0.00)                9,000,000.00      9,000,000.00 Debit Credit a Investment in Bonds                  9,808,433.00 To Bond Premium                    808,433.00 To Bank                9,000,000.00 b Bank                      270,000.00 To Interest on Bond                    270,000.00 c Bank                  9,000,000.00 Investment in Bonds                  9,000,000.00 Balance sheet Presentation December 31 , 20X1 June 30 , 20X2 Investment in Bonds                9,808,433.00    9,734,601.66 Bond Premium                 (808,433.00)     (734,601.66)

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