Question

Help on step 2 B

Instructions Campbell, Inc. produces and sells outdoor equipment. On July 1, 20Y1. Campbell issued $30,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $31,951,110. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 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:* 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.) b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.) 3. Determine the total interest expense for 20Y1. *Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

		Debit	Credit
Jun 30	Interest expense	1435001		=31888910*9%/2
	Premium on Bonds payable	64999
	Cash		1500000	=30000000*10%/2
	Workings:
	Interest expense for Dec. 31	1437800		=31951110*9%/2
	Premium amortized for first period	62200		=1500000-1437800
	Carrying value after first payment	31888910		=31951110-62200
	Interest expense for June 30	1435001		=31888910*9%/2