ounting Principles. Page II. BONDS PAABLE (5 points, 15 minutes On March 1 RSH C

Question

ounting Principles. Page II. BONDS PAABLE (5 points, 15 minutes On March 1 RSH Corporation issued $900,000 worth of ten year, 10 percent bonds. The semiannual interest dates are March 1 and September 1. Because the market rate for similar investments was 9.6 percent, the bonds were issued at a price/quote of 102.5. Prepare journal entries without explanations to record the bond issue on March 1 and the payment of interest and amortization of premium/discount on September 1. Use the straight line method of amortization. 3/1 [Bond Issue]: 9/1 [Interest Payment]: 9/1 [Amortization of discount/premium]

Explanation / Answer

Face value of the bond 900000 Issue price 102.5 Proceeds from the bond issue 922500                    (900,000 x 102.5/100) Premium on issue 22500 Entry on issue of the bond Date Account Title Debit Credit Mar.1 Cash 922500 Premium on bond issue 22500 Bond payable 900000 Interest payment on 9/1 Date Account Title Debit Credit Sep.1 Interest Expense 48500 Cash 45000 Amortization of premium Date Account Title Debit Credit Sep.1 Premium on bond issue 1125 Interest Expense 1125 Premium on bond issue to be amortized in 10 years or 20 semi annual periods. Bond premium amortized on each interest payment = 22500/20 =1125 Carrying value of the bond on Mar.1, 19X2 after payment of interest =922500-1125-1125 = 920250

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.