Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley

Question

Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley Corporation wholesales repair products to equipment manufacturers. On April í Year i, tey issued $ interest rate of 8%, receiving cash of $20,811,010, interest is payable semiannually on April i and October 1. 20,000,000 of five-year, 9% bonds at a market (effective) a. Journalize the entry to record the issuance of bonds on April 1, Year 1. For a compound transaction, if an amount box does not require an entry, leave it blank Cash Premium on Bonds Payable Bonds Payable Feodbac Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is refiected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. Learning Objective 2. b. Journalize the entry to record the first interest payment on October 1, Year 1, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank Interest Expense Premium on Bonds Payable Cash

Explanation / Answer

a 01-Apr Cash 20811010          Premium on bonds payable 811010          Bonds payable 20000000 b 01-Oct Interest expense 818899 Premium on bonds payable 81101 (811010*6/12/5)            Cash 900000 (20000000*9%*6/12)

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