Question

Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $77,000,000 of 20-year, 14% bonds at a market (effective) interest rate of 12%, receiving cash of $88,566,940. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank.

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.

2. Journalize the entries to record the following:b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the interest method. Round to the nearest dollar. a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the interest method. Round to the nearest dollar.

Answer 1

SOLUTION

S.No.	Date	Accounts titles	Debit ($)	Credit ($)
1.	July 1, 20Y1	Cash	88,566,940
		Premium on bonds payable		11,566,940
		Bonds payable		77,000,000
2a.	Dec.31, 20Y1	Bond interest expense	5,100,826
		Premium on bonds payable (11,566,940/40)	289,174
		Cash (77,000,000*7%)		5,390,000
2b.	June 30, 20Y2	Bond interest expense	5,100,826
		Premium on bonds payable (11,566,940/40)	289,174
		Cash (77,000,000*7%)		5,390,000

** 20 years = 20*2 = 40 periods