Question

On June 30, 2020, Sarasota Company issued $3,340,000 face value of 14%, 20-year bonds at $3,842,540, a yield of 12%. Sarasota uses the effective- interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. (a) 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 O 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. No. Account Titles and Explanation Debit Credit Date (1) June 30, 2020 (2) December 31, 2020 (3) June 30, 2021

Answer 1

No.	Date	Account Titles	Debit	Credit
1	June 30,2020	Cash	3842540
		Bonds payable		3340000
		Premium on Bonds payable		502540
2	December 31,2020	Interest expense	230552		=3842540*12%/2
		Premium on Bonds payable	3248
		Cash		233800	=3340000*14%/2
3	June 30,2021	Interest expense	230358		=(3842540-3248)*12%/2
		Premium on Bonds payable	3442
		Cash		233800	=3340000*14%/2
4	December 31,2021	Interest expense	230151		=(3842540-3248-3442)*12%/2
		Premium on Bonds payable	3649
		Cash		233800	=3340000*14%/2