Homework Answers
Premium on bonds payable = Cash received - Face value
= $4,894,071 - $4,400,000
= $494,071
Number of semiannual interest payments = 4 years X 2 = 8
Premium amortisation = $494,071 / 8 = $61,759
| Account Titles and Explanation | Debit | Credit |
| Interest expense ($132,000 - $61,759) | $70,241 | - |
| Premium on bonds payable | $61,759 | - |
| Cash | - | $132,000 |
| (To record interest paid and premium amortisation) |
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