Question

E10-11 Recording Bond Issue and First Interest Payment with Premium (Effective-Interest Amortization) LO10-3 On January 1, 2018, Bochini Corporation sold a $10 million, 8.25 percent bond issue. The bonds were dated January 1, 2018, had a yield of 8 percent, pay interest each December 31, and mature 10 years from the date of issue. Use Table 9C.1, Table 9C.2 Required: 1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round time value factor to 4 decimal places. Enter your answers in dollars not in millions rounded to the nearest whole dollar.) View transaction list Journal entry worksheet < 1 > Record the issuance of bond at a premium. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018 Record entry Clear entry View general journal

Answer 1

information given in the question: on January 1 2018 Bochini corporation sold $10,000,000 face value of 8.254. bond issue. 10 years Yield rate = 8% Interest paid at December 31 matunity Computation of issue price of the Bond on January. 1. 2018: year Bord cashflows Discontrata @87. present value of cashflows 1-10 ($10,000 P00 x8-251) $825,000 6.7101 $ 5,535,832-50 $4632,000 10 $ 10,000,000 0.4632 $10,167,832.50 issue price of The Bond on January.1.2018 + $10,167,833 (rounded to nearest whole number) Toumal Entry to record the issuance of Bonds. on January. 1. 2018 General Jounal Debit Credit Date Jan.1.2018 cast Account $10,167,833 Bond payable $10,000,000 premium on Bond payable $ 167,833 Joumal Entry recorded for issuance of Bonds at premium) (Being

Toumal Entry to record the Interest payment on December 31.2018 (using effective Interest rate) Debit Credit Date General Journal Dec 31 2018 $813427 Interest Expense --- (+10,167,833x8.6) premium on Bond payable $11,573 $825,000 cash account ($10,000,000x8.254.) (Being Joumal Entry recorded for interest paymenton. December 31, 2018) BOCHINI CORPORATION Financial Statements For the year ended December 31.2018 Statement of Femings: $ 813,427 Bond Interest Expense. $813, 427 Statement of financial position. Long term liabilities: Sh. Boneles pageabte 6: $15,000 $10,000,000 825y. Bonds preyable $70,467,533 tess. premium on Bond $11,573) Add $10,011,573. Amortisation $1644960 For any clarification, please comment Thank you