LRNA Company issued $300,000, 11%, 10-year bonds on January 1, 2014, for $318,69
ID: 2504172 • Letter: L
Question
LRNA Company issued $300,000, 11%, 10-year bonds on January 1, 2014, for $318,694. This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually on July 1 and January 1. LRNA uses the effective-interest method to amortize bond premium or discount. Instructions: Prepare the journal entries to record the following.(Round to the nearest dollar): (A) The issuance of the bonds. (B) The payment of interest and the premium amortization on July 1,2014, assuming that interest was not accrued on June 30. C) The accrual of interest and the premium amortization on December 31, 2014
Explanation / Answer
a) CR Long Term Liab. $300K
CR Bond Premium $ 18,694
DR Bank 318,694$
b) Dr Interest Expense. 15,934.7$ For Jan to Jun 14
DR Bond Premium $ 565.3
CR Bank 16,500
c) Dr Interest Expense. 15,906.44$ For Jul - Dec 14
DR Bond Premium $ 593.56 (@ 10% of remaning book value (Amortized premium + Original bond amount)
CR Bank 16,500
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