Issuing Bonds at a Premium On the first day of the fiscal year, a company issues...

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Issuing Bonds at a Premium On the first day of the fiscal year, a company issues a $2,800,000, 8%, 6-year bond that pays semi

Premium Amortization On the first day of the fiscal year, a company issues a $3,000,000, 12%, 4-year bond that pays semiannua

business accounting

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Answer 1

Answer #1

1 Journalize the bond issuance

Account	Debit	Credit
Cash	3,230,825
Bonds payable		2,800,000
Premium on Bonds Payable		430,825

2)

The premium of bond = 3,095,018-3000000 = 95,018

Premium is amortised equally over the life of the bond , life here is equal to 4 *2 = 8 periods

Premium amortised at the end of first interest payment = 95,018/ 8 = 11,877

Journal Entry
Interest Expense a/c..Dr	168,123
Premium on bonds payable a/c.. Dr	11,877
To Cash		180,000

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Answer 2

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