Teal Mountain Inc. issues $5.0 million, 10-year, 8% bonds at 101, with interest payable on January...

Teal Mountain Inc. issues $5.0 million, 10-year, 8% bonds at 101, with interest payable on January 1. The straight-line method is used to amortize bond premium.

Prepare the journal entry to record interest expense and bond premium amortization on December 31, 2022, assuming no previous accrual of interest. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	enter an account title for the journal entry on December 31enter an account title for the journal entry on December 31	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
	enter an account title for the journal entry on December 31enter an account title for the journal entry on December 31	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
	enter an account title for the journal entry on December 31enter an account title for the journal entry on December 31	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount

Expert Solution

Answer

Date	Accounts title	Debit	Credit
Dec-31	Interest Expense [400000 - 5000]	$ 395,000
	Premium on Bonds Payable [see working above]	$ 5,000
	Interest Payable [$5 millions x 8%]		$ 400,000


	Working
	Bonds face Value	$ 5,000,000
	Issue Price ( 5000000*101/100)	$5,050,000
	Premium on Bonds payable	$50,000
	No. of years	10
	Straight Line amortisation of premium with each interest payment	$ 5,000

ekkarill92 answered 2 years ago

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