On the first day of the fiscal year, a company issues a $1,800,000, 7%, 5-year bond...
On the first day of the fiscal year, a company issues a $1,800,000, 7%, 5-year bond that pays semiannual interest of $63,000 ($1,800,000 × 7% × ½), receiving cash of $2,042,530.
Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Homework Answers
| Premium on issue of bond | ||||
| =$2042530-1800000 | ||||
| $ 2,42,530 | ||||
| Number interest period = 5 year *2 =10 | ||||
| Amortization of premium per period | ||||
| =$242530/10 | ||||
| $ 24,253 | ||||
| The journal entry would be | ||||
| Date | Account Title | Debit | Credit | |
| Interest expenses | 38747 | |||
| Premium On Bond payable | 24253 | |||
| Cash | 63000 | |||
| (to record interest expenses and amortization on bond payable) | ||||
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