Question

On January 1, 2019, Company C. issued five-year bonds with a face value of $500,000 and a coupon interest rate of 6%, with interest payable semi-annually. 1. Prepare a partial bond amortization table for the first two interest payments assuming that interest is paid on July 1 and January 1 and that the bonds sold based on the following scenario. 2. Record the journal entries relating to the bonds on January 1, July 1, and December 31 Market Rate 5% (Received $521,881 for the bond)

Answer 1

Less: Issue Price of Bond Face Value of Bond Premium on bond $521,881 $500,000 $21,881 Solution 1 Interest Premium Unamorti Bond Interest to be Amortiza zed carrying Period Interest Expense paid tion Premium amount 01-Jan-19 $ $21,881 $521,881 July 1, 2019 $13,047 $15,000 $1,953 $19,928 $523,834 31-Dec-19 $13,096 $15,000 $1,904 $18,024 $525,738

Debit$ Credit $ 521881 Date Particular 01-Jan-19 Cash Premium on issue of bond Bonds payable (To record issue of bond in premium) 21881 500000 13047 1953 July 1,2019 Interest Premium issue on bond cash (to record interest expense) 15000 13096 1904 31-Dec-19 Interest Premium issue on bond cash (to record interest expense) 15000