Entries for issuing bonds and amortizing premium by straight-line method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $3,500,000 of 8-year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $3,907,830. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank. Account Credit Cash ✓ Premium on Bonds Payable Bonds Payable Feedback ►Check My Work Account Debit Interest Expense Premium on Bonds Payable Cash 3,907,830 b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for 6 months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Credit Debit 154,609 X 407,830 20,391 X 3,500,000 175,000
Entries for issuing bonds and amortizing premium by straight-line method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $3,500,000 of 8-year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $3,907,830. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank. Account Credit Cash ✓ Premium on Bonds Payable Bonds Payable Feedback ►Check My Work Account Debit Interest Expense Premium on Bonds Payable Cash 3,907,830 b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for 6 months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Credit Debit 154,609 X 407,830 20,391 X 3,500,000 175,000
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...
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Would you please help me understand how you got 16 for semiannual periods (number of period)?
Bond premium amortised = Total bond premium ÷ Number of period
= $407,830 ÷16 semiannual periods = $25,489 (Rounded to the nearest dollars).
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