E10-13 Recording and Reporting a Bond Issued at a Premium (with Premium Account)

Question

E10-13 Recording and Reporting a Bond Issued at a Premium (with Premium Account) LO10-5 Park Corporation is planning to issue bonds with a face value of $3,500,000 and a coupon rate of 10 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the issuances of the bonds. Note: Enter debits before credits. Date General Journal Debit Credit January 01 Record entry Clear entry View general journal

Explanation / Answer

Amount PV factor Present value Semi-annual interest 175000 13.29437 2326515 Principal 3500000 0.43499 1522465 Issue price 3848980 1-Jan Cash 3848980       Bonds payable 3500000       Premium on Bonds payable 348980

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