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12 January, 07:40

Nectarine issued $400,000 face amount of 12% bonds payable on January 1, 2017 at 104. The bonds were dated January 1, 2017, pay interest on each January 1, and mature in five years.

Nectarine accrued interest on the bonds described above on December 31, 2017. The premium on the bonds is amortized using the straight-line method.

Nectarine redeemed the above bonds at book value when the book value was $409,600.

Nectarine issued $200,000 face amount of six-year, 10% bonds payable on January 1, 2017, at 94. Interest is payable annually on January 1. Record the accrual of interest on these bonds at December 31, 2017 using the straight-line method of amortization.

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  1. 12 January, 07:58
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    Cash A/C Dr. $416000 * (400000*104%)

    To Bonds Payable A/C $400000

    To Premium on bonds payable A/C $16000

    Interest expenses A/C Dr. $44800

    Premium on bonds payable A/C Dr. $3200 (16000/5)

    To cash A/C $48000 (400000*12%)

    Bonds Payable A/C Dr. $400000

    Profit on redemption of bond A/C Dr. $9600

    To cash A/C $409600

    Cash A/C Dr. $188000 * (200000*94%)

    Discount on bonds payable A/C Dr. $12000

    To Bonds Payable A/C $200000

    Interest expenses A/C Dr. $22000

    To Discount on bonds payable A/C $2000 (12000/6)

    To cash A/C $20000 (200000*10%)
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