USING A PREMIUM AMORTIZATION TABLE (STRAIGHT LINE)

For Dingle Corporation, the following amortization table was prepared when $400,000 of five-year, 7 percent bonds were sold on December 31, 2008, for $420,000.

Period Cash Payment

(Credit)

Interest Expense

(Debit)

Premium on Bonds Payable

(Debit)

Premium on Bonds Payable Balance Carrying Value At issue $20,000 $420,000 6/30/09 $14,000 $12,000 $2,000 18,000 418,000 12/31/09 14,000 12,000 2,000 16,000 416,000 6/30/10 14,000 12,000 2,000 14,000 414,000 12/31/10 14,000 12,000 2,000 12,000 412,000 6/30/11 14,000 12,000 2,000 10,000 410,000 12/31/11 14,000 12,000 2,000 8,000 408,000 6/30/12 14,000 12,000 2,000 6,000 406,000 12/31/12 14,000 12,000 2,000 4,000 404,000 6/30/13 14,000 12,000 2,000 2,000 402,000 12/31/13 14,000 12,000 2,000 0 400,000 Required:

. Prepare the entry to recognize the issuance of the bonds on December 31, 2008.

. Prepare the entry to recognize the first interest payment on June 30, 2009.

. Determine what interest expense for this bond issue Dingle will report in its 2010 income statement.

. Indicate how these bonds will appear in Dingle’s December 31, 2012, balance sheet.

Exercise