Answer:
1.- thwe cash payment are the same for each period as the coupon bond rate is fixed:
2,600,000 face value x 5% coupon rate / 2 payment per year = <em>65,000</em>
<em>On the last payment, we are going to calculate 65,000 + face value</em>
<em>2,600,000 + 65,000 = 2,665,000</em>
<em>2.- amortization per period 19,513</em>
<em>3.- interest expense per period 45,487</em>
<em>4.- 45,487 interest expense per period x 30 payment dates = 1,364,610</em>
cash 3,182,390 debit
bonds payable 2,600,000 credit
premium on BP 585,390 credit
-- to record issuance --
interest expense 45,487 debit
premium on BP 19,513 debit
cash 65,000 credit
-- entry for each payment date--
Explanation:
proceeds: 3,182,390
face value: 2,600,000
premium: 585,390
amortization per period:
585,390 / 30 payment = 19,513
This will be the amortization on the premium on bonds payable for each payment
3.- as the amortization is fixed under straight-line method the interest expense is also fixed:
65,000 cash proceeds - 19,513 amortization = 45,487 interest expense
