| Bond issue price= cash int. * PVIFA(3.25%,6) + Par value * PVIF(3.25%,6) | ||||
| Bond issue price= (4000000*3%)*5.3726 + 4000000*0.8254 | ||||
| Bond issue price= 3946312 | ||||
| Discount amount = 4000000-3946312 = 53688 | ||||
| Amortisation schedule: | ||||
| Period | Cash interest | Interest exp. | Dis. amortised | Carrying Value |
| 1-Jul-14 | 3946312 | |||
| 1-Jan-15 | 120000 | 128255 | 8255 | 3954567 |
| 1-Jul-15 | 120000 | 128523 | 8523 | 3963091 |
| 1-Jan-16 | 120000 | 128790 | 8790 | 3971881 |
| 1-Jul-16 | 120000 | 129076 | 9076 | 3980957 |
| 1-Jan-17 | 120000 | 129371 | 9371 | 3990328 |
| 1-Jul-17 | 120000 | 129672 | 9672 | 4000000 |
| 53688 | ||||
| Journal Entries: | ||||
| Date | Acc Titles | Debit $ | Credit $ | |
| 7/1/2014 | Cash | 3946312 | ||
| Discount on Bond payable | 53688 | |||
| Bond Payable | 4000000 | |||
| (bond issued on dicount) | ||||
| 12/31/2014 | Interest expense | 128255 | ||
| Interest payable | 120000 | |||
| Discount on Bond payable | 8255 | |||
| (interest made payable for six months) | ||||
| 1/1/2015 | Interest payable | 120000 | ||
| Cash | 120000 | |||
| (interest paid) | ||||
| 7/1/2015 | Interest expense | 128523 | ||
| Cash | 120000 | |||
| Discount on Bond payable | 8523 | |||
| (interest paid for six months) | ||||
| 12/31/2015 | Interest expense | 128790 | ||
| Interest payable | 120000 | |||
| Discount on Bond payable | 8790 | |||
| (interest made payable for six months) | ||||
| 1/1/2016 | Interest payable | 120000 | ||
| Cash | 120000 | |||
| (interest paid) | ||||
| 7/1/2016 | Interest expense | 129076 | ||
| Cash | 120000 | |||
| Discount on Bond payable | 9076 | |||
| (interest paid for six months) | ||||
| 7/1/2016 | Bond Payable | 2000000 | ||
| Discount on Bond payable | 9521 | (53688-34645)/2 | ||
| Common Stock | 8000 | 8000*1 | ||
| Additional paid in Capital | 1982479 | |||
| (50% bonds converted into common shares and | ||||
| additional paid-in booked) | ||||
| 12/31/2016 | Interest expense | 64686 | ||
| Interest payable | 60000 | |||
| Discount on Bond payable | 4686 | |||
| (interest made payable for six months) | ||||
| 1/1/2017 | Interest payable | 60000 | ||
| Cash | 60000 | |||
| (interest paid) | ||||
| 7/1/2017 | Bond Payable | 2000000 | ||
| Interest expense | 64836 | |||
| Cash | 2060000 | |||
| Discount on Bond payable | 4836 | |||
| (Principle and interest paid for balance Bonds) | ||||
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