A consumer is 20 years old and expects to live to age 80. He has a current wealth of $100,000, an annual income of $100,000, and
1 answer:
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Answer and Explanation:
The Journal entry is shown below:-
1. Cash Dr, $1,011,047
To bonds payable $920,000
To Premium issue of bonds $91,047
(Being Issue of bonds at premium is recorded)
2. The completion of the table is shown below:-
Dec 31, 2018 Amount Interest rate Total
Interest expense $1,011,047 4% $40,441.8
(8% × 6 ÷ 12)
Cash $920,000 4.5% $41,400
(9% × 6 ÷ 12)
Amortization of premium $958.2
Interest expense Dr, $40,441.8
Premium issue of bonds Dr, $9,582
To Cash $41,400
(Being interest expense and amortization of premium is recorded)
3. Dec 31, 2018 Amount Interest rate Total
Interest expense $1,010,088 4% $40,403.5
( $1,011,047 - $958.2) (8% × 6 ÷ 12)
Cash $920,000 4.5% $41,400
(9% × 6 ÷ 12)
Amortization of premium $996.5
Interest expense Dr, $40,403.5
Premium issue of bonds Dr, $995.5
To Cash $41,400
(Being interest expense and amortization of premium is recorded)
