Question

Amortize Premium by Interest Method Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued $30,000,000 of five-year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $32,433,150. Interest is payable semiannually. Shunda's fiscal year begins on January 1. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Cash 32,433,150 Premium on Bonds Payable 2,433,150 Bonds Payable 30,000,000 Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account 2. First semiannual interest payment, including amortization of premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Premium on Bonds Payable Cash
On the first day of its fiscal year, Ebert Company issued $12,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $11,558,459. The company uses the interest method.

Answer 1

Amortization table
	Col I	Col II	Col III	Col IV
Date	Interest Payment($30,000,000*5%)	Interest expenses(Col IV*4%)	Premium amorrtization(Col I -Col II)	Bond carrying amount
Jan-01				3,24,33,150
Jun-30	15,00,000	12,97,326	2,02,674	3,22,30,476
Dec-31	15,00,000	12,89,219	2,10,781	3,20,19,695
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Jan-01	Cash	336320
		Bonds Payable		300000
		Premium on Bonds Payable		36320
		(To Bond issued at premium)
	Jun-30	Interest Expenses	12,97,326
		Premium on bonds payable	2,02,674
		Cash		15,00,000
	Dec-31	Interest Expenses	12,89,219
		Premium on bonds payable	2,10,781
		Cash		15,00,000
		Annual Interest paid	30,00,000
		Less:premium amortized	(4,13,455)
		Interest expenses for first year	25,86,545