Question
In: Accounting
Premium Amortization On the first day of the fiscal year, a company issues an $3,800,000, 12%,...
Premium Amortization
On the first day of the fiscal year, a company issues an
$3,800,000, 12%, 5-year bond that pays semiannual interest of
$228,000 ($3,800,000 × 12% × ½), receiving cash of
$4,093,425.
Journalize the first interest payment and the amortization of
the related bond premium. Round to the nearest dollar. If an amount
box does not require an entry, leave it blank.
Interest Expense
Premium on Bonds Payable
Cash
Redemption of Bonds Payable
A $930,000 bond issue on which there is an unamortized premium
of $80,000 is redeemed for $766,000.
Journalize the redemption of the bonds. If an amount box does
not require an entry, leave it blank.
Bonds Payable
Premium on Bonds Payable
Gain on Redemption of Bonds
Cash
Entries for Issuing Bonds
Thomson Co. produces and distributes semiconductors for use by
computer manufacturers. Thomson Co. issued $390,000 of 20-year, 11%
bonds on May 1 of the current year at face value,, with interest
payable on May 1 and November 1. The fiscal year of the company is
the calendar year.
May 1 Issued the bonds for cash at their face amount.
Nov. 1 Paid the interest on the bonds.
Dec. 31 Recorded accrued interest for two months.
Journalize the entries to record the above selected
transactions for the current year.
May 1
Cash
Bonds Payable
Nov. 1
Interest Expense
Cash
Dec. 31
Interest Expense
Interest Payable
Solutions
Expert Solution
Solution 1:
| Journal Entries | |||
| S. No. | Particulars | Debit | Credit |
| 1 | Interest expense Dr | $198,657.00 | |
| Premium on bond payable Dr ($293,425/10) | $29,343.00 | ||
| To Cash | $228,000.00 | ||
| (To record interest payment and premium amortization) | |||
Solution 2:
| Journal Entries | |||
| S. No. | Particulars | Debit | Credit |
| 1 | Bond Payable Dr | $930,000.00 | |
| Premium on bond payable Dr | $80,000.00 | ||
| To Gain on redemption of bonds | $244,000.00 | ||
| To Cash | $766,000.00 | ||
| (To record redemption of bonds) | |||
Solution 3:
| Journal Entries | |||
| S. No. | Particulars | Debit | Credit |
| 1 | Cash Dr | $390,000.00 | |
| To Bonds payable | $390,000.00 | ||
| (To record issue of bonds) | |||
| 2 | Interest expense Dr | $21,450.00 | |
| To Cash | $21,450.00 | ||
| (To record interest payment) | |||
| 3 | Interest expense Dr | $7,150.00 | |
| To Interest payable | $7,150.00 | ||
| (To record interest accrued) | |||
ekkarill92 answered 9 months agoRelated Solutions
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