Question

XP12-35A (similar to) Question Help On January 1, 2018, Teachers Credit Union (TCU) issued 7%, 20 year bonds payable with face value of $300,000. These bonds pay interest on June 30 and December 31. The issue price of the bonds is 110. Journalize the following bond transactions: Click the icon to view the bond transactions.) (Assume bonds payable are amortized using the straight-line amortization method. Record debits first, then credits. Select explanations on the last line of the journal entry. Round your answers to the nearest whole dollar) a. Journalize the issuance of the bonds on January 1, 2018 Accounts and Explanation Debit Date Credit 2018 Jan. 1 300,000 Cash Bonds Payable Premium on Bonds Payable Issued bonds at a premium 17.50 Choose from any list or enter any number in the input fields and then click Check Answer Check Answer Clear All 3 parts 5 remainin javascript doExercise *] N os P] w

Answer 1

Face Value of Bonds = $300,000

Issue Value of Bonds = 110% * $300,000
Issue Value of Bonds = $330,000

Premium on Bonds Payable = Issue Value of Bonds - Face Value of Bonds
Premium on Bonds Payable = $330,000 - $300,000
Premium on Bonds Payable = $30,000

Annual Coupon Rate = 7.00%
Semiannual Coupon Rate = 3.50%
Semiannual Coupon = 3.50% * $300,000
Semiannual Coupon = $10,500

Time to Maturity = 20 years
Semiannual Period = 40

Semiannual Amortization of Premium = Premium on Bonds Payable / Semiannual Period
Semiannual Amortization of Premium = $30,000 / 40
Semiannual Amortization of Premium = $750

Semiannual Interest Expense = Semiannual Coupon - Semiannual Amortization of Premium
Semiannual Interest Expense = $10,500 - $750
Semiannual Interest Expense = $9,750

Accounts and Explanation Debit Credit Date Cash Jan. 01, 2018 330,000 Bonds Payable 300,000 Premium on Bonds Payable 30,000 Interest Expense Premium on Bonds Payable 9,750 June 30, 2018 750 Cash 10,500 Interest Expense 9,750 Dec. 31, 2018 Premium on Bonds Payable 750 Cash 10,500 Bonds Payable Dec. 31, 2037 300,000 Cash 300,000