Grocery Corporation received $316.333 for 8.50 percent bonds issued on January 1

Question

Grocery Corporation received $316.333 for 8.50 percent bonds issued on January 1, 2015, at a market interest rate of 5.50 percent. The bonds had a total face value of $258,000, stated that interest would be paid each December 31, and stated that they mature in 10 years Assume Grocery Corporation uses the straight-line method to amortize the bond premium Required 1.& 2. Complete the required joumal entries to record the bond issuance and the first interest payment on December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar) View transaction list Record the issuance of bonds for $316,333 with a face value of $258,000. Record the interest payment on December 31, 2015.

Explanation / Answer

Journal Entries :-

Date Particulars Debit ($) Credit ($) Jan. 1 Cash A/c Dr. 316333 To Unamortized Bond Premium ($316333-$258000) 58333 To Bonds Payable 258000 (To record bonds issued at premium) Dec. 31 Bond Interest A/c Dr. ($258000*8.50%) 21930 Unamortized Bond Premium A/c Dr.($58333/10) 5833 To Cash a/c 27763 (To record annual interest paid to bond holders and amortized the premium)

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