On June 30 2008 Mischa Auer Company issued $4 000 000 face value of 13% 20-year bonds at $4 300 920 a yield of 12%. Auer uses the effective interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Instructions(A) Prepare the journal entries to record the following transactions.1. The issuance of the bonds on June 30 2008.2. The payment of interest and the amortization of the premium on Dec 31 20083. The payment of interest and the amortization of the premium on June 30 2009.4. The payment of interest and the amortization of the premium on Dec. 31 2009(B) Show the proper balance sheet presentation for the liability for bonds payable on the Dec. 31 2009 balance sheet. Objectives: Describe the accounting valuation for bonds at date of issuance.Apply the methods of bond discount and amortization.
