Question

PIZ-35A Analyzing and journalizing bond transactions On January 1, 2018, Educators Credit Union (ECU) issued 8%, 20-year bonds payabl with face value of $1,000,000. These bonds pay interest on June 30 and December 31. The issue price of the bonds is 109. Journalize the following bond transactions: a. Issuance of the bonds on January 1, 2018 b. Payment of interest and amortization on June 30, 2018 c. Payment of interest and amortization on December 31, 2018. d. Retirement of the bond at maturity on December 31, 2037, assuming the last interest payment has already been recorded. 12-36A Repeg Compuuing debt to

Answer 1

Solution:

Note: we are assuming that ECU is using straight line method of premium amortization.

Journal Entries - Educators Credit Union
Date	Particulars	Debit	Credit
1-Jan-18	Cash Dr	$1,090,000.00
	To Bond Payable		$1,000,000.00
	To Premium on bond payable		$90,000.00
	(To record issue of bond at premium)
30-Jun-18	Interest expense Dr	$37,750.00
	Premium on bond payable Dr ($90,000/40)	$2,250.00
	To Cash ($1,000,000*8%*6/12)		$40,000.00
	(To record interest payment and premium amortization)
31-Dec-18	Interest expense Dr	$37,750.00
	Premium on bond payable Dr ($90,000/40)	$2,250.00
	To Cash ($1,000,000*8%*6/12)		$40,000.00
	(To record interest payment and premium amortization)
31-Dec-37	Bond Payable Dr	$1,000,000.00
	To Cash		$1,000,000.00
	(To record bond repayment at maturity)