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kati45 [8]
2 years ago
8

E-Tech Initiatives Limited plans to issue $500,000, 10-year, 4 percent bonds. Interest is payable annually on December 31. All o

f the bonds will be issued on January 1, 2019. Show how the bonds would be reported on the January 2, 2019, balance sheet if they are issued at 102.
Business
1 answer:
Blababa [14]2 years ago
7 0

Answer:

E-Tech Initiatives Limited

Partial balance sheet

as on January 2, 2019

Liabilities

Long term Liabilities

Bond Payable ________________ $500,000

Add: Premium on Bond _________ <u>$10,000   </u>

_____________________________________ $510,000

Explanation:

First Calculate the issuance value

Issuance value = $500,000 x 102% = $510,000

The bond is issued on Premium, Now calculate the premium on bond value

Premium on bond = Issuance value - Premium on Bond

Premium on bond = $510,000 - $500,000

Premium on bond = $10,000

The bond payable value of $500,000 and Premium on the bond aer reported in the long term liability section of balance sheet.

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