Question

Harvard Inc. issues $4.0 million, 5-year, 8% bonds at 102, with interest payable on January 1. The straight-line method is used to amortize bond premium.

Prepare the journal entry to record the sale of these bonds on January 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1	Cash	enter a debit amount
	Bonds Payable		$4,000,000
	Premium on Bonds Payable		enter a credit amount

Prepare the journal entry to record interest expense and bond premium amortization on December 31, 2022, assuming no previous accrual of interest. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	enter an account title for the journal entry on December 31	enter a debit amount
	enter an account title for the journal entry on December 31	enter a debit amount
	enter an account title for the journal entry on December 31		enter a credit amount

Answer 1

Par value of bonds = $4,000,000

Cash proceeds from issue of bonds = 4,000,000 x 102%

= $4,080,000

Premium on bonds payable = Cash proceeds from issue of bonds - Par value of bonds

= 4,080,000-4,000,000

= $80,000

Date	Account Titles and Explanation	Debit	Credit
Jan. 1	Cash	$4,080,000
	Bonds Payable		$4,000,000
	Premium on Bonds Payable		$80,000

Annual amortization of bonds premium = 80,000/5

= $16,000

Annual interest payment = 4,000,000 x 8%

= $320,000

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Interest expense	$304,000
	Premium on bonds payable	$16,000
	Interest payable		$320,000

Kindly comment if you need further assistance. Thanks‼!