# Using the bond from Practice Exercise 14-5B, journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar.

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 14, Problem 6PEB
Textbook Problem
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## Using the bond from Practice Exercise 14-5B, journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar.

To determine

Prepare journal entry to record first interest payment and amortization of premium on bonds.

### Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations. Premium on bonds payable: It occurs when the bonds are issued at a high price than the face value. Prepare journal entry for first interest payment and amortization of premium on bonds.  Date Account Title and Explanation Post Ref Debit ($) Credit ($) Interest Expense (3) Â 409,113 Â Premium on Bonds PayableÂ (1) Â 30,887 Cash (2) 440,000 Â Â Â Â (To record semiannual payment of interest and amortization of premium on bonds) Â Â Â Table (1) • Interest expense is an expense and it decreases the equity value. So, debit it by$409,113.
• Premium on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $30,887. • Cash is an asset and it is decreased. So, credit it by$440,000.

Working notes:

(1)

Calculate premium on bonds payable semiannually...

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