E10-9 Indicating the Effects of a Premium Bond Issue and Interest Payment on the

Question

E10-9 Indicating the Effects of a Premium Bond Issue and Interest Payment on the Financial Statements /LO 1 Grocery Corporation received $302,578 for 12.00 percent bonds issued on January 1, 2015, at a market interest rate of 9.00 percent. The bonds had a total face value of $252,000, stated that interest would be paid each December 31, and stated that they mature in 10 years. Required Complete the following table for each account by indicating (a) whether it is reported on the Balance Sheet (B/S) or Income Statement (/S); (b) the dollar amount by which the account increases, decreases, or does not change (0) when Grocery Corporation issued the bonds; and (c) the direction of change in the account increase, decrease, or no change] when Grocery Corporation records the interest payment on December 31 (a) Financial Statementssuance (c) Interest Paid Account Bonds Payable Discount on Bonds Payable Interest Expense Premium on Bonds Payable

Explanation / Answer

ACCOUNT

ACCOUNT

(a) FINCANCIAL STATEMENT (b) ISSUANCE (c) INTEREST PAID Bonds Payable Balance Sheet $       252,000 does not change Discount on Bonds Payable N/A N/A N/A Interest Expense Income State Statement does not change Increase Premium on Bonds Payable Balance Sheet $          50,578 Decrease Note: Please ask in comment if you need any further clarification, thank you

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