Question

Campbell, Inc. produces and sells outdoor equipment. On July 1, 20Y1. Campbell issued $30,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $31,951,110. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

1.	Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.*
2.	Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.) b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.)
3.	Determine the total interest expense for 20Y1. *Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Amortization table
	Col I	Col II	Col III	Col IV
Date	Interest Payment($30,000,000*5%)	Interest expenses(Col IV*4.5%)	Premium amorrtization(Col I -Col II)	Bond carrying amount
Jul 31 20Y1				3,19,51,110
Dec 31 20Y1	15,00,000	14,37,800	62,200	3,18,88,910
Jun 30 20Y2	15,00,000	14,35,001	64,999	3,18,23,911
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Jul 31 20Y1	Cash	3,19,51,110
		Bonds Payable		3,00,00,000
		Premium on Bonds Payable		19,51,110
		(To Bond issued at premium)
	Dec 31 20Y1	Interest Expenses	14,37,800
		Premium on bonds payable	62,200
		Cash		15,00,000
	Jun 30 20Y2	Interest Expenses	14,35,001
		Premium on bonds payable	64,999
		Cash		15,00,000
	Total Interest expenses for 20Y1 =$1,437,800