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7/1/2017 60,000 call price is 101 12/31/2019 accrue interest amortize the premium 12/31/2017 How do you...

7/1/2017 60,000 call price is 101

12/31/2019 accrue interest amortize the premium

12/31/2017 How do you show this on the balance sheet

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Answer #1

Answer.

1/7/17 : When the security is issued entry would be:

Cash Dr 60600

To Premium payable 600

To Security Payable 60000

31/12/12 : When interest is due every year, then a portion of it would be set off against the premium that was taken earlier on issue:

Eg : Half yearly interest is 300 and maturity of security is 10 years, then each time 60 premium would be subtracted from interest payable

Interest on Security Payable Dr 240

Premium On Security Dr 60

To Cash     300

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