Question

On June 30, 2020, Ayayai Company issued $4,180,000 face value of 13%, 20-year bonds at $4,494,460, a yield of 12%. Ayayai uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2021, balance sheet

Answer 1

Solution:

Bond Amortization Schedule
Period	Cash Paid	Interest Expense	Premium Amortized	Unamortized Premium	Carrying Value
30-Jun-20				$314,460	$4,494,460
31-Dec-20	$271,700	$269,668	$2,032	$312,428	$4,492,428
30-Jun-21	$271,700	$269,546	$2,154	$310,273	$4,490,273
31-Dec-21	$271,700	$269,416	$2,284	$307,990	$4,487,990

Ayayai Company
Balance Sheet (Partial)
As of December 31, 2021
Particulars		Amount
Long term liabilities:
Bond Payable	$4,180,000.00
Add: Premium on bond payable	$307,990.00
Net Bond Liability		$4,487,990.00