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Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley Corporation wholesales repair products to...

Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method

Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $3,600,000 of 10-year, 8% bonds at a market (effective) interest rate of 7%, receiving cash of $3,855,822. Interest is payable semiannually on April 1 and October 1.

a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank.

Cash
Premium on Bonds Payable
Bonds Payable

b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for six months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Interest Expense
Premium on Bonds Payable
Cash
1 0
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Answer #1

a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank.

Apr 1 Cash 3855822
Premium on Bonds Payable 255822
Bonds Payable 3600000

b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for six months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Oct 1 Interest Expense 131209
Premium on Bonds Payable (255822/20) 12791
Cash (3600000*8%*6/12) 144000
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