Question

Bramble Company issued $432,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semiannually on July 1 and January 1. Bramble Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a) The issuance of the bonds. (b) The payment of interest and related amortization on July 1, 2020. (c) The accrual of interest and the related amortization on December 31, 2020.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
January 1, 2020	Cash ( $ 432,000 x 102% )	$ 440,640
	Premium on Bonds Payable		$ 8,640
	Bonds Payable		$ 432,000
	(To record the issuance of the bonds )
July 1, 2020	Interest expense ( $ 440,640 x 9.7705% x 1 / 2) )	$ 21,526
	Premium on Bonds Payable	$ 74
	Cash                ( $ 432,000 x 10% x 1/ 2 )		$ 21,600
	(To record the payment of interest )
December 31, 2020	Interest expense ( $ 440,640 (-) $ 74 ) x 9.7705% x 1 /2 )	$ 21,523
	Premium on Bonds Payable - Bal. Fig.	$ 77
	Interest payable		$ 21,600
	(To record the accrual of interest )