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On 1/1/20X1, Illini issues 10% bonds dated 1/1/20X1, with a face amount of $60,000. The...

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Accounting

  • On 1/1/20X1, Illini issues 10% bonds dated 1/1/20X1, with a face amount of $60,000. The bonds mature on 12/31/20X4 (4 years). For bonds of similar risk and maturity, the market yield is 8%. Interest is paid semiannually on June 30 and December 31. Illini incurs a total of $2,000 debt issuance costs. After its third interest payment on 6/30/20X2, Illini buys back the bonds on the market for $61,000.

Project 2.1 Part 1 Balance Sheet

1/1/20X1

Cash

[A]

Bonds payable

[B]

Premium on bonds

[C]

Cash

[D]

6/30/20X1

Interest expense

[E]

Premium on bonds

[F]

Cash

[G]

12/31/20X1

Interest expense

[H]

Premium on bonds

[I]

Cash

[J]

6/30/20X2

Interest expense

[K]

Premium on bonds

[L]

Cash

[M]

6/30/20X2

Bonds payable

[N]

Premium on bonds

[O]

Cash

[P]

Gain

[Q]

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