Shane Company

1. Issue price (5,000,000 x 110) 5,500,000

Accrued interest from July to October 1, 2020 (5,500,000 x 12% x 3/12)
150,000
Total 5,650,000
Less: Bond issue cost 220,000
Net cash received 5,450,000 (A)

Carol Company

1. Bond Payable 5,000,000

Premium on bond payable 200,000
Bond issue cost
(125,000)
Bond Liability 5,075,000 (B)

Carmina Company

1. Nominal Interest (5,000,000 x 127) 600,000

2. Carrying amount -1/1/2020 5,385,000

Carrying amount-12/31/2020 5,125,000
Decrease in Liability-gain 260,000 (B)

3. P5,125,00 (B)

4. Cash 5,385,000
Bonds payable 5,385,000
#
Interest Expense 600,000
Cash 600,000
#
Interest Expense 300,000
Cash 300,000
#
Bonds payable 260,000
Gain on change in fair value 260,000