Question

(a) Prepare an installment payments schedule for the first 3 years. (b) Prepare the entries for (1) the loan and (2) the first two installment payments. Pollem . A l Company issued $400.000.9%. 20-year bonds on January 1, 2012, at 103. Inter- est is payable semiannually on July 1 and January 1. ACME uses straight-line amortization for bond premium or discount. Instructions Prepare the journal entries to record the following. (a) The issuance of the bonds (b) The payment of interest and the premium amortization on July 1, 2012, assuming that inter- est was not accrued on June 30. (c) The accrual of interest and the premium amortization on December 31, 2012 (d) The redemption of the bonds at fil/3 assuming interest for the last interest period has been paid and recorded.

problem 2

Answer 1

problem 2 $400,000 * 103% issue price of bonds face value of bonds premium on bonds payable total semiannual periods premium amortization every semiannual period $ 412,000 $ 400,000 $ 12,000 40 $300 + $400,000 * 9%/2 I interest payment every semiannual period | premium amortization every semiannual period interest expense every semiannual period $ 18,000 $ 300 $ 17,700

journal account titles and explanation date serial no debit credit 01 January 2012 | (a) $ 412,000 cash bonds payable premium on bonds payable (to record issue of bonds) $ 400,000 $ 12,000 01 July 2012 (b) $ 17,700 $ 300 interest expense premium on bonds payable cash (to record interest payment) $ 18,000 31 December 2012 (c) $ 17,700 $ 300 interest expense premium on bonds payable interest payable (to record interest accrual) $ 18,000 01 January 2032 (d) $ 400,000 bonds payable cash (to record bond redemption) $ 400,000

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