Question

Kingbird, Inc. issues $5.2 million, 20-year, 7% burcis at 102, with interest payable on January 1. The straight-line method is used to amortize bond premium. Your answer is correct. Prepare the journal entry to record the sale of these boncs on January 1 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit Jan 1 C S2000 Bonds Payable Premium on Bonde Payable cTextbook and Media List of Accounts Attempts: 2 of 3 used - Your answer is partially correct. Prepare the journal entry to record interest Expense and bond premium amortization on December 31 2022, assuming ng previous accrualiserest.Credit account titles are automatically indented when amount is entered. Do not indent manual) Date Account Titles and Explanation Debit Crexit Dec 31 ET Fromium on Bonds Payable . Discount on Londe Payabc

Answer 1

The required journal entries for the issue of bonds is shown as follows:-

Journal Entries (Amounts in $)

No	Date	Account Titles and Explanations	Debit	Credit
a)	Jan. 1	Cash (5,200,000*1.03)	5,356,000
		Bonds Payable		5,200,000
		Premium on Bonds Payable (5,356,000-5,200,000)		156,000
		(To record the issue of bonds payable)
b)	Dec 31	Interest Expense (468,000-15,600)	452,400
		Premium on Bonds Payable (156,000/10 yrs)	15,600
		Cash (5,200,000*9%)		468,000
		(To record the first interest payment)

Notes:-

1) As bonds are issued at $103, the face value of $5,200,000 is multiplied by 1.03. The difference between issue price and face value is credited to premium on bonds payable which is amortized equally over 10 years (i.e. bond life).