Exercise 14-09 On June 30, 2020, Sage Company issued $3,551,000 face value of 13%, 20-year bonds at $3,818,140, a yield of 12%. Sage uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Your answer is partially correct. Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts, Credit account titles are automatically indented when amount is entered. Do not indent manually.) (1) The issuance of the bonds on June 30, 2020. (2) The payment of interest and the amortization of the premium on December 31, 2020. (3) The payment of interest and the amortization of the premium on June 30, 2021. (4) The payment of interest and the amortization of the premium on December 31, 2021. (1) The issuance of the bonds on June 30, 2020. (2) The payment of interest and the amortization of the premium on December 31, 2020. (3) The payment of interest and the amortization of the premium on June 30, 2021. (4) The payment of interest and the amortization of the premium on December 31, 2021. No. Date Account Titles and Explanation Debit Credit (1) June 30, 2020 Cash 3,818,140 Premium on Bonds Pay 267,140 Bonds Payable 3,551,000 (2) December 31, 2020 Interest Expense 229088.40 Premium on Bonds Payable 1,726.60 Cash 230,815 (3) June 30, 2021 Interest Expense 228,984.80 Premium on Bonds Payable 1,830.20 Cash 230,815 (4) December 31, 2021 Interest Expense 228,978.588 Premium on Bonds Payable 1,836.412 Cash 230,815 Your answer is partially correct. Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2021, balance sheet. (Round answers to 0 decimal places, e.g. 38,548.) Sage Company Balance Sheet December 31, 2021 Long-term Liabilities Bonds Payable 3,551,000 Premium on Bonds Payable Book Value of Bonds Payable SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT Your answer is partially correct. Provide the answers to the following questions. (1) What amount of interest expense is reported for 2021? (Round answer to O decimal places, e.g. 38,548.) Interest expense reported for 2021 457,963.388 (2) Will the bond interest expense reported in 2021 be the same as, greater than, or less than the amount that would be reported if the straight-line method of amortization were used? The bond interest expense reported in 2021 will be greater than the amount that would be reported if the straight-line method of amortization were used. (3) Determine the total cost of borrowing over the life of the bond. (Round answer to 0 decimal places, e.g. 38,548.) X Total cost of borrowing over the life of the bond (4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest expense if the straight-line method of amortization were used? less than The total bond interest expense for the life of the bond will be the total interest expense if the straight-line method of amortization were used. Click if you would like to Show Work for this question: Open Show Work
