Question

On June 30, 2020, Nash Company issued $3,340,000 face value of 14%, 20-year bonds at $3,842,540, a yield of 12%. Nash uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

(a) Prepare the journal entries to record the following transactions. (Round 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.) (1) The issuance of the bonds on June 30, 2020. (2) The payment of interest and the amortization of the premium on December 31, 2020. (3) The payment of interest and the amortization of the premium on June 30, 2021. (4) The payment of interest and the amortization of the premium on December 31, 2021.

Answer 1

Interest	Intt to be	intt expense	premium	unamortized	Bond
Periods	paid		amortization	premium	CV
Issue date				502,540	3,842,540
1	233800	230552	3248	499292	3839292
2	233800	230358	3442	495850	3835850
3	233800	230151	3649	492201	3832201
Date	Account titles & Explanations				Debit	Credit
6/30/2020	Cash				3,842,540
	premium on bonds payable					502,540
	Bonds payable					3,340,000
Date	Account titles & Explanations				Debit	Credit
12/31/2020	interest expense				230,552
	premium on bonds payable				3,248
	Cash					233,800
Date	Account titles & Explanations				Debit	Credit
6/30/2021	interest expense				230,358
	premium on bonds payable				3442
	cash					233800
Date	Account titles & Explanations				Debit	Credit
12/31/2021	interest expense				230,151
	premium on bonds payable				3649
	cash					233800