okmarks Window Help ??93%-. Sun 8:22 PM al- Bond Premium, Entries for Bonds Paya

Question

okmarks Window Help ??93%-. Sun 8:22 PM al- Bond Premium, Entries for Bonds Payable Transactions Campbell Inc. produces and sells outdoor equipment, on July 1, Year 1, Campbell issued $46,900,000 of 10-year, 13% bonds at a market (effective) interest rate of 11%, receiving cash of $52,504,770. Interest on the bonds is payable semiannually on December 31 and Ane 30.. The fiscal year of the company is the calendar year Required: If an amount box does not require an entry, leave it blank 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. Cash Premium on Bonds Payable Bonds Payable 04,770 Bonds Payable is always recorded at face value. Any difference in issue price is refflected in a premium or discount account -line method of amortization provides equal amounts of amortization over the life of the bond Objective 2 2. Journalize the entries to record the following: 8 0 5

Explanation / Answer

Maturity value of bonds 46900000 Stated rate of interest 13% Market rate of interest 11% Issue price 52504770 Premium on Bonds 5604770 Periods of interest 20 Amortized premium in each period 280238.5 Cash interest (46900,000*13%*6/12) 3,048,500 Journal entry for issuance: Cash account Dr. 52,504,770    Bonds payable Account 46,900,000    Premium on Bonds payable Account 5,604,770 Journal entry for interst Interest account Dr. 2768262 Premium on Bonds payable Dr. 280238     Cash account 3048500 Req 3 Interst expense for Year-1 Total cash interest paid 3048500 Less: Premium amortized 280238 Interest expense 2768262 Req 4: Yes, The bonds proceeds is always greater when contract rate of interest is more than market rate. Req 5: Cash interest 3048500 maturity value 46900000 Annuity factor for 20 period at5.5% 11.9501 PVf for 20th period 0.34275 Present value of face amount 36429880 Present value of interest 16074975 Price received on bonds 52504855

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