Add premium on bond 95000 by v3sv6B

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									Elkins Company sold $2,500,000, 8%, 10-year bonds on July 1, 2011. The bonds were dated
July 1, 2011, and pay interest July 1 and January 1. Elkins Company uses the straight-line
method to amortize bond premium or discount. Assume no interest is accrued on June 30.
Prepare all the necessary journal entries to record the issuance of the bonds and bond interest
expense for 2011, assuming that the bonds sold at 104.

July 1

Cash                   Dr.2600000

Bond payable                          Cr2500000

Premium on Bond                       Cr100000

2500000*1.04 = 2600000

Dec 31

Interest expense       Dr95000                (2500000*.04-5000)

Premium on bond        Dr5000                 (100000/20)

Interest payable                      Cr100000

Prepare journal entries as in the previous part of the question assuming that the bonds sold at 98.
July 1

Cash                   Dr.2450000

Discount on bond       Dr 50000

Bond payable                          Cr2500000

2500000*.98 = 2450000

Dec 31

Interest expense       Dr102500               (2500000*.04+2500)

Discount on bond                      Cr2500                 (50000/20)

Interest payable                      Cr100000
Show balance sheet presentation for each bond issue at December 31, 2011.

For 104

Bond payable                   2500000

Add premium on bond            95000

Total Carrying value of bond   2595000

For 98

Bond payable                   2500000

Less Discount on bond          -47500

Total Carrying value of bond   2452500

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