DNA Corporation issued $4,000,000 in 8 percent, 10-year bonds on February 1, 2010, at 115. Semiannual interest payment dates are January 31 and July 31. Use the straight-line method and ignore year-end accruals.
1. With regard to the bond issue on February 1, 2010:
a. How much cash is received? 4,600,000
b. How much is Bonds Payable? 4,000,000
c. What is the difference between a and b called and how much is it? Unamortized Bonds Premium = 600,000
2. With regard to the bond interest payment on July 31, 2010:
a. How much cash is paid in interest? 160,000
b. How much is the amortization? 30,000
c. How much is interest expense? 130,000
3. With regard to the bond interest payment on January 31, 2011:
a. How much cash is paid in interest? 160,000
b. How much is the amortization? 30,000
c. How much is interest expense? 130,000