Question

solve below calculation question

Samna Resorts issued $1,000,000 of 8%, 20-year bonds on January 1, 2020, at 97.82 to yield 9%. Interest is payable semiannually on July 1 and January 1.

Prepare the journal entries to record the following.

a. The issuance of the bonds.

b. The payment of interest and the related amortization on July 1, 2020.

c. The accrual of interest and the related amortization on December 31, 2020.

Answer 1

Solution:

a)

Date	Account title and explanation	Debit	Credit
01 Jan 2020	Cash(1,000,000*97.82%)	$1,978,200
	Bonds payable		$1,000,000
	Premium on bonds payable		$978,200
	(To record the issuance of bonds payable)

b)

Date	Account title and explanation	Debit	Credit
01 July 2020	Interest expense	$15,545
	Premium on bonds payable(978,200/40)	$24,455
	Cash(1,000,000*8%)*6/12		$40,000
	(To record the payment of interest and related amortization)

c)

Date	Account title and explanation	Debit	Credit
31 Dec 2020	Interest expense	$15,545
	Premium on bonds payable(978,200/40)	$24,455
	Cash(1,000,000*8%)*6/12		$40,000
	(To record the payment of interest and related amortization)

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