Question

Question 5 Really Amazing Vacations Ltd. issues $1,000,000 of ten-year, 10% bonds dated January 1,2020. Interest is payable on January 1 and July 1 each year. The proceeds realized from the issue were the $1,048,801 sales price less the $80,000 fee charged by Really Amazing's investment bank. Really Amazing's year-end is December 31. Prepare journal entries: a. The issuance of the bonds. b. Payment of interest and related amortization on July 1, 2020. c. Accrual of interest and related amortization on December 31, 2020. Date Explanation/Account Debit Credit

Answer 1

Date	Explanation/Account	Debit	Credit
Jan 1, 2020	Cash	$968,801
	Bond issue Expense	$80,000
	Bonds Payable		$1,000,000
	Premium on Bonds Payable		$48,801
	(To record issue on bonds)
July 1, 2020	Interest Expense	$47,560
	Premium on Bonds Payable	$2,440		($$48,801/20 )
	Cash		$50,000	($1,000,000 x 10% x 1/2)
	(To record payment of interest and related amortization)
Dec 31, 2020	Interest Expense	$47,500
	Premium on Bonds Payable	$2,500		($$48,801/20 )
	Cash		$50,000	($1,000,000 x 10% x 1/2)
	(To record payment of interest and related amortization)