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On January 1, 2015, Carter Sales issued $15,000 in bonds for $15,800. They were 8-year bonds...

On January 1, 2015, Carter Sales issued $15,000 in bonds for $15,800. They were 8-year bonds with a stated rate of 9%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the Bond Premium. Immediately after the issue of the bonds, the ledger balances appeared as follows:



After the first interest payment on June 30, 2015, what will be the balance in the Premium Account?

debit of $900

credit of $625

credit of $750

debit of $50
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Answer #1

Correct answer--------Credit $750

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Cash Interest paid Interest expense Premium Amortization Closing Net Bond Liability
At issue date $ 800 $ 15,800
1st interest payment $ 675 $ 625 $ 750 $ 15,750

.

Bond issue price   $ 15,800
Face value $ 15,000
Premium on bonds payable $ 800
Number of Interest payments (8 years x 2)                           16
Discount/ premium to be amortized per Half year $ 50
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