Question

Explain The Steps T... W AMZN | Amazon.co... Amazon Financial R... 6 Basic Financial Ra... Amazon Long-term... eBook Calculator Print Item Effective Interest Premium Amortization Chart of Accounts General Journal Analysis Instructions Polk Incorporated issued 5127,000 of 7% bonds on July 1, 2016. for $131,944.18. The bonds were dated January 1, 2016, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 6%. Polk uses the effective interest method of amortization Required: Prepare the journal entries to record the issue of the bonds on July 1, 2016, and the interest payments on December 31, 2016, and June 30, 2017. In addition, prepare a bond interest expense and premium amortization schedule for the bonds through June 30, 2017

Answer 1

Solution

2020	Account Title and Explanation	Debit	Credit
1-Jul-16	Cash	$ 131,944
	Premium on bonds payable		$ 4,944
	Bonds payable		$ 127,000
	(To record Issuance of bonds )
31-Dec-16	Bond interest expense	$ 3,958
	Premium on bonds payable	$ 487
	Cash		$ 4,445
	(Interest on bond paid and Discount amortized)
30-Jun-17	Bond interest expense	$ 3,944
	Premium on bonds payable	$ 501
	Cash		$ 4,445
	(Interest on bond paid and Discount amortized)

..

Amortization table
	Period	Cash payment	Interest expense	Premium on Bonds payable	Carrying Value of Bond
July 1 2016	Issued			-$ 4,944	$ 131,944
Dec 31	2016	$ 4,445	$ 3,958	-$ 487	$ 131,458
June 30	2017	$ 4,445	$ 3,944	-$ 501	$ 130,956