Description of this paper

I have the solution below. I just wanted to know w...

Description

Solution


Question

I have the solution below. I just wanted to know why is WHY IS 3 DIVIDED BY 117? Prepare the necessary journal entries to record the following transactions relating to the long-term issuance of bonds of Sloan Co.: March 1 Issued $600,000 face value Sloan Co. second mortgage, 8% bonds for $654,120, including accrued interest. Interest is payable semiannually on December 1 and June 1 with the bonds maturing 10 years from this past December 1. The bonds are callable at 102. June 1 Paid semiannual interest on Sloan Co. bonds. (Use straight-line amortization of any premium or discount.) December 1 Paid semiannual interest on Sloan Co. bonds and purchased $300,000 face value bonds at the call price in accordance with the provisions of the bond indenture. March 1: Cash ................................................................................ 654,120 Bonds Payable ........................................................... 600,000 Premium on Bonds Payable ...................................... 42,120 Interest Expense ($600,000 ? 8% ? 3/12) ................ 12,000 June 1: Interest Expense .................................................................... 22,920 Premium on Bonds Payable ($42,120 ? 3/117) .................... 1,080 (WHY IS 3 DIVIDED BY 117?) Cash ........................................................................... 24,000 Dec. 1: Interest Expense .................................................................... 21,840 Premium on Bonds Payable ($42,120 ? 6/117) .................... 2,160 Cash ........................................................................... 24,000 Bonds Payable ....................................................................... 300,000 Premium on Bonds Payable* ................................................ 19,440 Gain on Redemption of Bonds .................................. 13,440 Cash ........................................................................... 306,000 *1/2 ? ($42,120 ? $1,080 ? $2,160) = $19,440.

 

Paper#4734 | Written in 18-Jul-2015

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