Question

Exercise 9-9A Record bonds issued at a premium and related semiannual interest (LO9-5) [The following information applies to the questions displayed below.) On January 1, 2021, Splash City issues $360,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 6%, the bonds will issue at $386,781. Exercise 9.9A Part 2 2. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required in the first account field. Round your final answers to the nearest whole dollar.) View transaction list Journal entry worksheet 3 Record the bond issue. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2021

Three journal entries to record

1. Record the bond issue

2. Record the first semiannual interest payment

3. Record the second semiannual interest payment

Answer 1

Solution

Date	Account Title and Explanation	Debit	Credit
January 01, 2021	Cash	$ 386,781
	Premium on bonds payable		$ 26,781
	Bonds payable		$ 360,000
	(To record Issuance of bonds )
June 30, 2021	Bond interest expense	$ 11,603
	Premium on bonds payable	$ 997
	Cash		$ 12,600
	(Interest on bond paid and Premium amortized)
December 31, 2021	Bond interest expense	$ 11,574
	Premium on bonds payable	$ 1,026
	Cash		$ 12,600
	(Interest on bond paid and Premium amortized)

Working

Year end	Cash paid	Interest expense	Change in carrying value	Carrying value
..1/1/2021				$             386,781
..6/30/2021	$        12,600	$        11,603	$             (997)	$             385,784
..12/31/2021	$        12,600	$        11,574	$         (1,026)	$             384,758