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Providence Inc. was authorized to issue $500,000 of face value bonds as follows:
|
Date of authorization |
Term |
Interest rate |
Interest payment dates |
|
January 1, 2015 |
3 years |
12% |
Semi-annually on June 30 and December 31 |
On January 1, 2015, the corporation issued $200,000 of face value bonds for $212,000.
Required:
- Calculate
- The amount of interest paid every interest payment date
- The amount of amortization to be recorded at each interest payment date (use the straight-line method of amortization).
- Prepare a schedule to show the effect of premium amortization on interest expense and bond carrying amount at each interest payment date. Assume amortization is recorded each time interest expense is recorded.
- Prepare the journal entries to record the interest and amortization at June 30, 2015.
- Prepare a partial balance sheet, showing the liability on December 31, 2015 and 2016. Assume the bonds will be redeemed December 31, 2017.
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