Question

1. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2032. The bonds were issued for $3,408,818 to yield 10%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. The 12/31/23 Premium on Bond Payable balance is:

Answer 1

Answer:

Premium ob bonds payable = $320,090.44 (credit balance)

Explanation:

January 1, 2020

Dr Cash 3,408,818

    Cr Bonds payable 3,000,000

    Cr Premium on bonds payable 408,818

January 1, 2021

Dr Interest expense 340,881.80

Dr Premium on bonds payable 19,118.20

    Cr Cash 360,000

($3,408,818 x 0.1) - $360,000 = -$19,118.20

January 1, 2022

Dr Interest expense 338,969.98

Dr Premium on bonds payable 21,030.02

    Cr Cash 360,000

($3,389,699.80 x 0.1) - $360,000 = -$21,030.02

January 1, 2023

Dr Interest expense 336,866.98

Dr Premium on bonds payable 23,133.02

    Cr Cash 360,000

($3,368,669.78 x 0.1) - $360,000 = -$23,133.02

December 31, 2023

Dr Interest expense 334,553.68

Dr Premium on bonds payable 25,446.32

    Cr Interest payable 360,000

($3,345,536.76 x 0.1) - $360,000 = -$25,446.32