Question

On January 1, 2016, Sayers Company issued $181,000 of five-year, 8 percent bonds at 104. Interest is payable semiannually on June 30 and December 31. The premium is amortized using the straight-line method.

  

No	Date	General Journal	Debit	Credit
1	Jan 01, 2016	Cash	188,240
		Premium on bonds payable		7,240
		Bonds payable		181,000
2	Jun 30, 2016	Interest expense
		Premium on bonds payable	724
		Cash
3	Dec 31, 2016	Interest expense
		Premium on bonds payable	724
		Cash
4	Jun 30, 2017	Interest expense
		Premium on bonds payable	724
		Cash
5	Dec 31, 2017	Interest expense
		Premium on bonds payable	724
		Cash

PLEASE HELP ME FIND THE INTEREST EXPENSE AND CASH. EVERYTHING ELSE IS CORRECT THANK YOUUU

Answer 1

Solution:

Face Value = $181,000

Issue Price = $181000*104% = $188,240

Premium on issue of bonds = $188240 - $181000 = $7,240

Period = 5 years = 10 Half years

Amortization of Premium 7240 / 10 = $724

Coupon rate = 8% = 4% half yearly

Cash paid for Interest $181,000*4% = $7,240

Ineterst Expense = Cash paid for interest - Amortized premium = $7240 - $724 = $6,516

Date	Accounts Title and explanation	Debit	Credit
01-Jan-16	Cash Dr	$1,88,240
	To Bonds Payable		$1,81,000
	To Premium on Bonds Payable		$7,240
30-Jun-16	Interest Expense Dr	$6,516
	Premium on Bonds Payable Dr	$724
	To Cash		$7,240
31-Dec-16	Interest Expense Dr	$6,516
	Premium on Bonds Payable Dr	$724
	To Cash		$7,240
30-Jun-17	Interest Expense Dr	$6,516
	Premium on Bonds Payable Dr	$724
	To Cash		$7,240
31-Dec-17	Interest Expense Dr	$6,516
	Premium on Bonds Payable Dr	$724
	To Cash		$7,240