On June 30, Jamison Company issued $2,500,000 of 10-year, 8% bonds, dated June 3

Question

On June 30, Jamison Company issued $2,500,000 of 10-year, 8% bonds, dated June 30, for $2,580,000.

Required:

Loss on Redemption of Bonds

Payment of first semiannual interest on December 31 (record separate entry from premium amortization). Refer to the Chart of Accounts for exact wording of account titles.

(1) Issuance of bonds. (2) Payment of first semiannual interest on December 31 (record separate entry from premium amortization). (3) Amortization by straight-line method of bond discount/premium on July 1.

Explanation / Answer

Journal entry :

No Account and explanation debit credit a Cash 2580000     Bonds payable 2500000      Premium on bonds payable 80000 b Interest expense (2500000*8%*6/12) 100000     Cash 100000 c Premium on bonds payable (80000/20) 4000     Interest expense 4000

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