Question

On January 1 of this year, Victor Corporation sold bonds with a face value of $1,510,000 and a coupon rate of 9 percent. The bonds mature in four years and pay interest semiannually every June 30 and December 31. Victor uses the straight-line amortization method and also uses a premium account. Assume an annual market rate of interest of 6 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.) 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.) View transaction list Journal entry worksheet Record the issuance of the bonds. Note: Enter debits before credits. Date Debit Credit January 01 General Journal Cash Bonds payable Premium on bonds payable

Answer 1

Table values are based on:
n=	8
i=	3.0%
Cash Flow	Amount	Present Value
Interest	$1,510,000*4.5% =$67,950	$4,76,988	PVAF(i,n)	PVIF(i,n)
Principal	$1,510,000	$11,92,009	7.01969	0.78941
Price of Bonds		$16,68,997
Premium on Bonds issued =$1,668,997 - $1,510,000 =$158,997
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Jan-01	Cash	16,68,997
		Bonds Payable		15,10,000
		Premium on Bonds payable		1,58,997
	Jun-30	Interest expenses	48,075
		Premium on Bonds payable	19,875
		Cash		67,950
	VICTOR CORPORATION
	Balance Sheet(Partial)
	At June 30
	Long-Term Liabilities
	Bonds Payable	$15,10,000
	Unamortized Premium	$1,39,122
	Net Bonds payable as on June 30		$16,49,122