Identify and analyze effect of the sale of the bonds on Jan 1,2017. Prepare a pr

Question

Identify and analyze effect of the sale of the bonds on Jan 1,2017.
Prepare a proper balance sheet presentation for Jan 1,2017
Identify and analyze the effect of the payment of interest on Dec 31,2017
Prepare a proper balance sheet presentation for Dec 31, 2017


Impact of a Premium Reagan Enterprises sold 20-year bonds on January 1, 2017. The face value of the bonds was $100,000 and they carry a 9% stated rate of interest which is paid on December 31 or every year. Reagan received $109,060 in return for the issuance of the bonds when the market rate was 8%. Any prenn um or discount is amortized using the effective interest method.

Explanation / Answer

1s January Cash a/c……dr 109060     To Bonds Payable a/c 100000     To Premium on bonds payable a/c 9060 Accounting Equation Assets = Liabilities + Capital Cash = 109060 Bonds 100000 Premium 9060 109060 = 109060

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