Answer:
(1) The issuance of the bonds on June 30, 2020.
Dr Cash 4,300,918
Cr Bonds payable 4,000,000
Cr Premium on bonds payable 300,918
(2) The payment of interest and the amortization of the premium on December 31, 2020.
Dr Interest expense 258,055.08
Dr Premium on bonds payable 1,944.92
Cr Cash 260,000
(3) The payment of interest and the amortization of the premium on June 30, 2021.
Dr Interest expense 257,938.38
Dr Premium on bonds payable 2,061.62
Cr Cash 260,000
(4) The payment of interest and the amortization of the premium on December 31, 2021
Dr Interest expense 257,814.69
Dr Premium on bonds payable 2,185.31
Cr Cash 260,000
Explanation:
amortization of bond premium for first coupon payment:
($4,300,918 x 6%) - ($4,000,000 x 6.5%) = $258,055.08 - $260,000 = -$1,944.92
amortization of bond premium for second coupon payment:
($4,298,973.08 x 6%) - ($4,000,000 x 6.5%) = $257,938.38 - $260,000 = -$2,061.62
amortization of bond premium for third coupon payment:
($4,296,911.46 x 6%) - ($4,000,000 x 6.5%) = $257,814.69 - $260,000 = -$2,185.31
