Star Inc. was authorized to issue $1,000,000 of 8 percent bonds. On April 1, 201
ID: 2533752 • Letter: S
Question
Star Inc. was authorized to issue $1,000,000 of 8 percent bonds. On April 1, 2016, the corporation issued bonds with a face value of $210,000 at a price of 102.0. The bonds mature 10 years from the date of issue. Interest is payable semiannually on October 1 and April 1.
Using the data given above, prepare the adjusting entry that would be made by Star Inc. on December 31, 2016, to record accrued interest and to amortize the premium.
Star Inc. was authorized to issue $1,000,000 of 8 percent bonds. On April 1, 2016, the corporation issued bonds with a face value of $210,000 at a price of 102.0. The bonds mature 10 years from the date of issue. Interest is payable semiannually on October 1 and April 1.
Explanation / Answer
Premium on issue = 210000*0.02= $4200 Adjusting entry: 31-Dec Interest expense 4095 Premium on Bonds payable 105 =4200/20/6*3 Interest Payable 4200 =210000*8%/12*3
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