ACCT 240 004 11 26 Chapter 10 Continued In straight line amortization we divide the total discount by the number of payment periods and that s the amount you credit to the discount on bonds payable each period Interest Expense sum Discount on bonds payable discount periods Cash amount of interest Issuing bonds at premium is same method as with discount sum the current value of principle and of interest Journal entry for paying interest at a premium Interest Expense sum Premium on bonds payable Cash E10 16 Present Value Principle 7894 x 1 400 000 1 105 160 Present Value Interest 56 000 x 7 0197 393 103 2 Total Current Value 1 498 263 Journal Entry For Initially placing it Cash 1 498 263 Premium 98 263 Bonds Payable 8 1 400 000 When paying interest Interest Expense 43 717 Premium on Bonds Payable 12282 875 Cash 56 000 Balance Sheet Long Term Liabilities Bonds Payable 1 400 000 Due Dec 31st 2015 Bond Premium 491 366 Total 1484 980 3 On Dec 31st When paying interest When paying interest Interest Expense 43 717 Premium on Bonds Payable 12282 875 Cash 56 000 Balance Sheet Long Term Liabilities Bonds Payable 1 400 000 Due Dec 31st 2015 Bond Premium 73 697 Total 1 473 697 Debt to Equity Ratio Total Liabilities SE This ratio shows the relationship between the amount of capital provided by owners and the amount provided by creditors In general a high ratio suggests that a company relies heavily on funds provided by creditors
View Full Document
Unlocking...