Understanding the Business Transaction Bonds sell at a premium when the market r

Question

Understanding the Business Transaction Bonds sell at a premium when the market rate of interest is than the contract rate of interest, premium amortization is the amount of cash interest paid, causing the amount of interest expense reported in the income statement to be the amount of cash interest paid on a bond On the first day of fiscal year, company issues $4,067000, 14%, 10 year bonds for cash when the market rate of interest was 11%. The bonds pay interest annually on June 30 and December 31. Determine(1) the premium on bonds payable at the date of insurance, (2) the semi-annual cash interest payment, (3) the semi annual premium amortization using the straight line method, and (4) the semi-annual interest expense. Round your answer to the nearest whole dollar amount. Recording in the Accounting system Journalize the first interest payment and the amortization of the bond discount on June 30, 2014 Round your answer to the nearest whole dollar amount. If an amount box does not require an entry, leave it blank or enter 0'.

Explanation / Answer

Journal entry:

Date Account title and Explanation Debit($) Credit($) 30-Jun Interest Expense 248238.15 Premium on Amortization 364518.5/10 36451.85            Cash (4067000*0.14/2) 284690 To record the interest expense for the semi annual period

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