Debt Issued at a Premium (Straight Line) on January 1, 2020 Solomon Crafts issue

Question

Debt Issued at a Premium (Straight Line) on January 1, 2020 Solomon Crafts issued 60,000 8-year bonds with 41,000 ace value External markets value the bonds at December 31 30 000 more than face value. The stated rate ofinterest ons omor s bonds is 5% andin ere spald annually on Prepare the necessary journal entry on December 31, 2021, assuming the straight-line method is followed. 2021 Dec. 31 Interest Expense Premium on Bonds Payable Y Cash Record interest expense.) Fuedbuck Any premium or discount is amortized to interest expense.

Explanation / Answer

2021 Dec. 31 Interest expense 2,921,250 Premium on bonds payable ($630000/8 years) 78,750 Cash (60000 x $1000 x 5%) 3,000,000 (Record interest expense)

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