USING A PREMIUM AMORTIZATION TABLE (STRAIGHT LINE)
For Dingle Corporation, the following amortization table was prepared when $400,000 of five-year, 7 percent bonds were sold on December 31, 2008, for $420,000.
|
Period
|
Cash Payment (Credit)
|
Interest Expense (Debit)
|
Premium on Bonds Payable (Debit)
|
Premium on Bonds Payable Balance
|
Carrying Value
|
|
At issue
|
|
|
|
$20,000
|
$420,000
|
|
6/30/09
|
$14,000
|
$12,000
|
$2,000
|
18,000
|
418,000
|
|
12/31/09
|
14,000
|
12,000
|
2,000
|
16,000
|
416,000
|
|
6/30/10
|
14,000
|
12,000
|
2,000
|
14,000
|
414,000
|
|
12/31/10
|
14,000
|
12,000
|
2,000
|
12,000
|
412,000
|
|
6/30/11
|
14,000
|
12,000
|
2,000
|
10,000
|
410,000
|
|
12/31/11
|
14,000
|
12,000
|
2,000
|
8,000
|
408,000
|
|
6/30/12
|
14,000
|
12,000
|
2,000
|
6,000
|
406,000
|
|
12/31/12
|
14,000
|
12,000
|
2,000
|
4,000
|
404,000
|
|
6/30/13
|
14,000
|
12,000
|
2,000
|
2,000
|
402,000
|
|
12/31/13
|
14,000
|
12,000
|
2,000
|
0
|
400,000
|
Required:
1. Prepare the entry to recognize the issuance of the bonds on December 31, 2008.
2. Prepare the entry to recognize the first interest payment on June 30, 2009.
3. Determine what interest expense for this bond issue Dingle will report in its 2010 income statement.
4. Indicate how these bonds will appear in Dingle's December 31, 2012, balance sheet.