Question

1-Issuing Bonds at a Premium

On the first day of the fiscal year, a company issues a $2,500,000, 12%, 4-year bond that pays semiannual interest of $150,000 ($2,500,000 × 12% × ½), receiving cash of $2,661,579.

Journalize the bond issuance. If an amount box does not require an entry, leave it blank.

2-Premium Amortization

On the first day of the fiscal year, a company issues a $2,600,000, 9%, 9-year bond that pays semiannual interest of $117,000 ($2,600,000 × 9% × ½), receiving cash of $2,764,571.

3-Redemption of Bonds Payable

A $870,000 bond issue on which there is an unamortized premium of $76,000 is redeemed for $794,000.

Journalize the redemption of the bonds. If an amount box does not require an entry, leave it blank.

Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Answer 1

1
Cash	2661579
Bonds payable		2500000
Premium on Bonds payable		161579
2
Interest expense	107857
Premium on Bonds payable	9143		=(2764571-2600000)/9*1/2
Cash		117000
3
Bonds payable	870000
Premium on Bonds payable	76000
Cash		794000
Gain on redemption of bonds		152000