14. On October 1, 2012 Bartley Corporation issued 5%, 10-year bonds with a face

Question

14. On October 1, 2012 Bartley Corporation issued 5%, 10-year bonds with a face value of $3,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis.

The entry to record the issuance of the bonds would include a

credit of $75,000 to Interest Payable.

credit of $120,000 to Premium on Bonds Payable.

credit of $2,880,000 to Bonds Payable.

debit of $120,000 to Discount on Bonds Payable.

credit of $75,000 to Interest Payable.

credit of $120,000 to Premium on Bonds Payable.

Explanation / Answer

Issue price is 104%*3000000 = $3,120,000

So Premium is 3120000 - 3000000 = $120,000

So The entry to record the issuance of the bonds would include a

1Oct yy Cash Dr 3120,000

Bond Payable Cr 3000,000

Prem on Bond payable Cr 120,000

So Ans is :

credit of $120,000 to Premium on Bonds Payable.

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