Answer:
1. Dr Cash $735,385
Dr Premium on Bond Payable $44,615
Cr To Bond Payable $780,000
2. 30-Jun
Dr Interest expense $31,254
Cr Premium on bond payable $2,004
Cr Cash $29,250
3. $737,389
Explanation:
1. Preparation of the journal entry to record the issuance of the bonds.
First step is to calculate the Present value
$780,000 × 0.51379 = $400,756
$29,250* × 11.44031 = $334,629
Issue price = $735,385
$780,000 × .075 × 1/2 = $29,250
Now let Prepare the journal entry to record the issuance of the bonds.
1-Jan
Dr Cash $735,385
Dr Premium on Bond Payable $44,615
($780,000-$735,385)
Cr To Bond Payable $780,000
(To record issuance of the bonds.)
2. Preparation of the journal entry to record the interest payment on June 30 of this year.
30-Jun
Dr Interest expense $31,254
($735,385 × .085 × 1/2)
Cr Premium on bond payable $2,004
($31,254-$29,250)
Cr Cash $29,250
($780,000 × .075 × 1/2 )
(To record interest payment)
3. Calculation to determine the bond payable amount that Park will report on its June 30 balance sheet
Balance Sheet (Partial)
As of June 30
Particulars Amount
Long term liabilities:
Bond Payable $780,0000
Less Discount o Bonds payable ($42,611)
($44,615-$2,004)
Bonds payable $737,389
Therefore the bond payable amount that Park will report on its June 30 balance sheet is $737,389
