Question

explanation please

enOVO Sprint Power Number AutoSave OB A S ACCT 3312 ch 14 hw 2019 FA EX Search ile Home Insert Draw Page Layout Formulas Data Review View Help Arial - 10 AA === Wrap Test Number BIU - A Merge & Center - $ - % lipboard Font Alignment 19 fe A Venezuela Co. is building a new hockey arena at a cost of $8.000.000 . It received a downpayment of $4,000,000 from local businesses to support the project, and now needs to borrow $4,000,000 to complete the project. It therefore decides to issue $4.000.000 10.00% -year bonds. These bonds were issued on January 1, 2018. and pay interest annually on each January 1. The bonds yield 8.00% Instructions: (a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2018 Cash Unamortized bond issue cost Bonds payable Premium bonds payable (1) Prepare a bond amortization schedule up to and including January 1, 2021, using the effective interest method Entries for Bonds Issurance and Retirement Lea A Bmx 90

Answer 1

Table values are based on:
n=	10
i=	8.0%
Cash Flow	Table Value	Amount	Present Value
Interest	6.71008	$4,00,000	$26,84,032
Principal	0.46319	$40,00,000	$18,52,760
Price of Bonds			$45,36,792
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Jan 1,2018	Cash	$45,36,792
		Bonds Payable		$40,00,000
		Premium Bonds Payable		$5,36,792
Since the Market Interest rate is 8% which is less than the stated interest rate of 10% hence the Bond is issued at Premium.
There seems to be no issue cost and hence the same has not been recorded
Amortization table-When the Bond is issued at premium
	Col I	Col II	Col III	Col IV
Date	Interest Payment($4,000,000*10%)	Interest expenses(Col IV*8%)	Premium amorrtization(Col I -Col II)	Bond carrying amount
01-Jan-18				45,36,792
01-Jan-19	4,00,000	3,62,943	37,057	44,99,735
01-Jan-20	4,00,000	3,59,979	40,021	44,59,714
01-Jan-21	4,00,000	3,56,777	43,223	44,16,491