Question

The Gorman Group issued $810,000 of 11% bonds on June 30, 2021, for $879,498. The bonds were dated on June 30 and mature on June 30, 2041 (20 years). The market yield for bonds of similar risk and maturity is 10%. Interest is paid semiannually on December 31 and June 30. Required: Complete the below table to record the company's journal entry. 1. to 3. Prepare the journal entries to record their issuance by The Gorman Group on June 30, 2021, interest on December 31, 2021 and interest on June 30, 2022 (at the effective rate). Complete this question by entering your answers in the tabs below. Calculation Reg 1 to 3 Complete the below table to record the company's journal entry nearest whole dollar. Enter interest rate to 1 decimal place. (l. Round Intermediate calculations and final answers to the 0.123 should be entered as 12.3).) Amount interest Rate Total December 31, 2021 Interest expense Cash Amortization of premium on bonds June 30, 2022 Amount Interest Rate Total

Answer 1

Solution:

31-Dec-21	Amount	Interest rate	Total
Interest expense	$879,498.00	5%	$43,975
Cash	$810,000.00	5.50%	$44,550
Amortization of premium on bonds			$575
30-Jun-22	Amount	Interest rate	Total
Interest expense	$878,923.00	5%	$43,946
Cash	$810,000.00	5.50%	$44,550
Amortization of premium on bonds			$604

Journal Entries - Gorman Group
Date	Particulars	Debit	Credit
30-Jun-21	Cash Dr	$879,498.00
	To Bond Payable		$810,000.00
	To Premium on bond payable		$69,498.00
	(To record bond issued at premium)
31-Dec-21	Interest expense Dr	$43,975.00
	Premium on bond payable Dr	$575.00
	To Cash		$44,550.00
	(To record annual payment and premium amortization)
30-Jun-22	Interest expense Dr	$43,946.00
	Premium on bond payable Dr	$604.00
	To Cash		$44,550.00
	(To record annual payment and premium amortization)