Intel Inc. is the pioneer in the manufacture of microprocessor for computers. Th

Question

Intel Inc. is the pioneer in the manufacture of microprocessor for computers. The company's fiscal year runs from April 1 to March 31. On 4/1/2015, Intel Issued $5,000,000 of 11% Bonds due in 10 years. The interest is payable annually on April 1. The market rate of interest on that date for bonds of similar risk is 10%.

Pleas identify the entry for debit to Interest Payable for 550,000 and credit to cash for same on April 1, 2016 in creating a  the journal entry for the issuance of the bonds and on the first interest payment date

Explanation / Answer

Journal Cash $5,307,228.36    To notes payable 5000000     To premium on issue $307,228.36 Rate 10% no of period 10 PMT 550000 FV 5000000 PV $5,307,228.36 Interest expense $530,722.84 Amortisation of premium $19,277.16    To Interest payable 550000

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