Question

The Gorman Group issued $980,000 of 9% bonds on June 30, 2021, for $1,076,985. The bonds were dated on June 30 and mature on June 30, 2041 (20 years). The market yield for bonds of similar risk and maturity is 8%. Interest is paid semiannually on December 31 and June 30.

Required:
Complete the below table to record the company's journal entry.
1. to 3. Prepare the journal entries to record their issuance by The Gorman Group on June 30, 2021, interest on December 31, 2021, and interest on June 30, 2022 (at the effective rate).

Answer 1

December 31 2021 Amount X Interest Rate = Interest Expenses | 1076985 X 4.00% = Cash 980000 X 4.50% = Amortization of Premium on bond Total Amount 43079 44100 1021 June 30 2022 Interest Expenses Cash Amount X Interest Rate = 1075964 X 4.00% = 980000 X 4.50% = Amortization of Premium Total Amount 43039 44100 1061

Date Issue Entry 1. Record the Bond Issue General Journal Debit Credit Jun-30 Cash 1076985 Premium on Bonds Payable 96985 Bonds Payable 980000 Record the issue of the Bond with Premium Date Record the interest Payment Record the interest Paymnet and amotization ! General Journal Debit Credit Dec-31 Interest Expenses 43079 Premium on Bonds Payable 1021 Cash 44100 Record the interest Paymnet and amotization Date Record the interest Expenses and amotization General Journal Debit Credit Jun-30 Interest Expenses 43039 Premium on Bonds Payable 1061 Cash 44100 Record the Accrues interest and amotization