On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds...
On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. The fiscal year of the company is the calendar year. Prepare entries to record the following transactions for the current fiscal year:
a. Issuance of the bonds.
If an amount box does not require an entry, leave it blank.
b. Second semiannual interest payment.
c. Amortization of bond premium for the first year, using the straight-line method of amortization.
Homework Answers
| A | Cash | 1,050,000 | |
| Bonds payable | 1,000,000 | ||
| Premium on Bonds Payable | 50,000 | ||
| B | Interest expense | 35,000 | |
| Cash (1,000,000*7%*6/12) | 35,000 | ||
| C | premium on Bonds payable | 2500 | |
| Interest expense | 2500 | ||
| (50,000/10)*(1/2) | |||
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