On the first day of the fiscal year, Jill Company issues $3,553,000, 14%, 10-yea

Question

On the first day of the fiscal year, Jill Company issues $3,553,000, 14%, 10-year bonds for cash of $3,960,509 when the market rate of interest was 12%. The bonds pay interest semi-annually on June 30 and December 31. Determine (1) the premium on bonds payable at the date of issuance, (2) the semi-annual cash interest payment, (3) the semi-annual premium amortization using the straight line method, and (4) the semi-annual interest expense. Round your answers to the nearest whole dollar amount. Selling Price of Bonds $ Face Value of Bonds Premium on Bonds Payable $ Semi-annual Cash interest payment $ Semi-annual Premium amortization Semi-annual Interest expense $

Explanation / Answer

1) Premium on bond payable :   (3,960,509-3,553,000)     $ 407,509

2) Semi annual cash interest (3,553,00 *14%*6/12)           $ 248,710

3)Semi annual premium amortised using straight line method (407,509/20)    $ 20,375

4)Semi annual interest expense (248,710+20,375)    $ 269,085

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