Homework Answers
a. Journal entry to record issuance of bond is as follows:
b.Journal entry to record interest expense and amortize the bond premium is as follows:
*Premium on bonds payable =142,000/(20 years*2 times a year)
c.Journal entry to record interest expense and amortize the bond premium and retirement of bonds at maturity is as follows:
Bond interest payable=7,100,000*8%*3/12=142,000
*premium on bonds payable is for 3 months so=142,000/20 years*3/12=1,775
Credit Debit 7,100,000 Date General Journal 1-Apr-13 Cash Premium on bonds payable Bonds Payable (7,100,000*102%) (to record the issuance of bonds at premium) 142,000 7,242,000
Credit Date General Journal 30-Sep-13 Bond interest expense Premium on bonds payable (142,000/40) Cash (7,100,000*8%*1/2) (to record payment of interest on the bond) Debit 280,450 3,550 284,000
Credit Date General Journal 31-Mar-33 Bond interest payable Bond interest expense Premium on bonds payable (142,000/20*3/12) Cash (to record payment of interest of bond) Debit 142,000 140,225 1,775 284,000 7,100,000 31-Mar-33 Bonds payable Cash (to record payment of bonds at maturity) 7,100,000
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