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Question#03: a) Off-balance-sheet financing is an attempt to borrow monies...

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Accounting

Question#03:
a) Off-balance-sheet financing is an attempt to borrow monies in such a way to prevent
recording the obligations. Explain the statement with appropriate rationale?
b) On July 1,2016, Sugarland Company issued Tk.2,000,000 face value of 10%,10-year
bonds at a yield of 12%. Sugarland uses the effective interest method to amortize bond
premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Required:
i. Prepare the journal entries to record the issuance of the bonds on July 1,2016.
ii. Prepare the journal entries to record the payment of interest and the amortization
of the discount on December 31,2016; on June 30,2017; on December 31,2017.
iii. What amount of interest expense is reported for 2017?
iv. Show the proper balance sheet presentation for the liability for bonds payable on
the December 31,2017, balance sheet.
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