Answer:
cash 410,200 debit
discount on bonds payable 18,000 debit
flotation cost 1,800 debit
bonds payable 430,000 credit
June 30th 2018:
Interest expense 26,780
discount on bonds payable 900
flotation cost 90
cash 25,800
December 31th 2018:
Interest expense 26,780
discount on bonds payable 900
flotation cost 90
cash 25,800
June 30th 2019:
Interest expense 26,780
discount on bonds payable 900
flotation cost 90
cash 25,800
bonds payable 430,000
redemption of the bonds:
loss on redemption 1,830 debit
discount on bond payable 15,300 credit
flotation cost 1,530 credit
cash 415,000 credit
Explanation:
Issuance:
We will subtract from the issued cost the cost.
issued at 412,000
face value 430,000
discount on bonds payable 18,000
payments:
580,000 x 0.06 = 25800 proceeds
amortization on flotation cost 1,800 / 20 = 90
on discount on bonds 18,000 / 20 = 900
Call:
disbursement 415,000
carrying value of the bonds:
discount on bond payable 18,000 - 900 - 900 - 900 = 15,300
flotation cost 1,800 - 90 -90 -90 = 1,530
bonds payable 430,000
discount on bond payable (15,300)
flotation cost (1, 530)
net 413, 170
result on redemption:
413,170 - 415,000 = -1,830 loss
