Question

someone please help me. i have no clue where to start

Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $56,800,000 of 10-year, 14% bonds at a market (effective) interest rate of 12%, receiving cash of $63,314,642. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an entry, leave it blank. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31. Year 1. and the amortization of the bond premium, using the straight line method. Round to the nearest dollar b. The Interest payment on June 30. Year 2. and the amortization of the bond premium, using the straight-line method. Round to the nearesto Ouck My Work

Answer 1

	Premium on Issue of Bonds =$63,314,642 - $56,800,000 =$6,514,642
	Premium amortization for each period =$6,514,642 / 20 =$325,732
	Cash Interest paid =$56,800,000*14%*6/12 =$3,976,000
	Interest expense for each period =$3,976,000 - $325,732 =$3,650,268
	Journal Entries:
1	Cash	$                   6,33,14,642
	Bonds Payable		$             5,68,00,000
	Premium on issue of Bonds		$                65,14,642
2.a	Interest expense	$                      36,50,268
	Premium on Bonds Payable	$                        3,25,732
	Cash		$                39,76,000
2.b	Interest expense	$                      36,50,268
	Premium on Bonds Payable	$                        3,25,732
	Cash		$                39,76,000
3	Total Interest expense for Year 1 =$3,650,268
4	When the contract rate is greater than the Market interest rate then it means that the Bond is issued at Premium
	So that is why the Cash Receipts will always be gretaer than the Face value.
5
Table values are based on:
n=	20
i=	6.0%
Cash Flow	Table Value	Amount	Present Value
PV of Interest	11.46992	$39,76,000	$4,56,04,402
PV of Principal	0.3118	$5,68,00,000	$1,77,10,240
PV of Bonds Payable			$6,33,14,642