In your initial audit of Beta Co., you find the following ledger account balances, Debit Credit 18%, 16-year Bonds Payable, 2017 issue 01/01/2017 P8,100,000 Treasury Bonds 09/01/2021 P1,026,000 Bond Premium 01/01/2017 480,000 Bond Interest Expense 01/01/2021 550,000 07/01/2021 550,000 The bonds were redeemed for permanent cancellation on September 1, 2021, at 108 plus accrued interest. The total bond interest expense for the year 2021 is.
In your initial audit of Beta Co., you find the following ledger account balances, Debit Credit 18%, 16-year Bonds Payable, 2017 issue 01/01/2017 P8,100,000 Treasury Bonds 09/01/2021 P1,026,000 Bond Premium 01/01/2017 480,000 Bond Interest Expense 01/01/2021 550,000 07/01/2021 550,000 The bonds were redeemed for permanent cancellation on September 1, 2021, at 108 plus accrued interest. The total bond interest expense for the year 2021 is.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bond redemption is the repayment of the principal amount of bonds.
Accrued interest is the amount of interest that has been added up but not paid yet.
Bonds are a type of loan, being a liability, if the amount of loan increases as such on it's issue then bonds needs to be credited and on the account of repayment as the loan amount reduces it is debited.
When the bonds value in market is more than it's face value then the excess amount is known as premium.
The premium amount is credited to a separate account i.e., premium account.
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