The Square Foot Grill, Inc., issued $200,000 of 10-year, 6 percent bonds on July

Question

The Square Foot Grill, Inc., issued $200,000 of 10-year, 6 percent bonds on July 1, 2016, at 102. Interest is payable in cash semiannually on June 30 and December 31. The straight-line method is used for amortization.

b.

Prepare the liabilities section of the balance sheet at the end of 2016 and 2017. (Amounts to be deducted should be indicated with minus sign.)

10 nts 0.50 points b. Prepare the liabilities section of the balance sheet at the end of 2016 and 2017. (Amounts to be deducted should be indicated with minus sign.) SQUARE FOOT GRILL, INC Balance Sheet (Partial) As of December 31 2016 2017 Liabilities Net carrying value of bonds Total liabilities HintsReferences eBook&Resources; Hint#1 Check my work

Explanation / Answer

Bonds issue price (200,000*1.02)= 204000 Bonds face value 200,000 premium of bonds 4,000 amortization of premium 4000/(10*2)= 200 Balance Sheet (parital) 2016 2017 Liabilities Bonds payable 200,000 200,000 Add:Unamortized premium 3,800 3400 Net carrying value of bonds 203,800 203,400

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