On October 1, 2015, Brimley Company sold 12% bonds having a maturity value of $800,000 for...
On October 1, 2015, Brimley Company sold 12% bonds having a maturity value of $800,000 for $853,382 plus accrued interest, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2015, and mature January 1, 2020, with interest payable December 31 of each year. Prepare the journal entries at the date of the bond issuance and for the first interest payment.
Homework Answers
Journal entry
| Date | account and explanation | Debit | Credit |
| Oct 1 | Cash | 925382 | |
| Bonds payable | 800000 | ||
| Premium on bonds payable | 53382 | ||
| Interest payable (800000*12%*9/12) | 72000 | ||
| Dec 31 | Interest payable | 72000 | |
| Interest expense (853382*10%*3/12) | 21335 | ||
| Premium on bonds payable | 2665 | ||
| Cash | 96000 |
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