Swanson Corporation issued $8 million of 20-year, 8 percent bonds on April 1, 20

Question

Swanson Corporation issued $8 million of 20-year, 8 percent bonds on April 1, 2011, at 102. Interest is due on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2031. Swanson's fiscal year ends on December 31. Prepare the following journal entries:


Prepare the journal entry at September 30, 2011, to pay interest and to amortize the bond premium.?


and also

Prepare the journal entry at March 31, 2031, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries).

Explanation / Answer

Bonds value is 8.4 million and are issued at a premium of 2%. That is bond of 100 issued for 102. Total value of premium = 8400,000 X 2 % = 168,000 Entry at the date of Issue : Cash / Bank - Debit -.......................................… 8,568,000 ( 8400,000 + 168000) Bonds -Issued 8% 840,000 of 100$ each - Credit.......................8400,000 Premium on bonds -Debit..................................… 168,000

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