Answer:
See the journal entries and explanation below.
Explanation:
The journal entries will look as follows
a) The issuance of bonds on January 1.
<u>Date Accounts title Debit ($) Credit ($) </u>
Jan. 1 Cash 111,671
Premium on Bonds Payable 8,271
Bonds Payable (w.1) 108,000
<em><u> (To record issuance of bonds.) </u></em>
b) The first interest payment on June 30.
<u>Date Accounts title Debit ($) Credit ($) </u>
Jun. 30 Interest Expense (w.4) 3,493
Premium on Bonds Payable (w.2) 827
Cash (w.3) 4,320
<em><u> (To record first interest payment) </u></em>
c) The second interest payment on December 31.
<u>Date Accounts title Debit ($) Credit ($) </u>
Dec. 31 Interest Expense (w.4) 3,493
Premium on Bonds Payable (w.5) 827
Cash (w.6) 4,320
<em><u> (To record second interest payment) </u></em>
Workings:
w.1: Bond payable = Cash - Premium on Bonds Payable = $111,671 - $8,271
w.2: Premium on Bonds Payable = January 1 Unamortized Premium - June 30 Unamortized Premium = $8,271 - $7,444 = $827
w.3: Cash = $108,000 * 8% * (6 / 12) = $4,320
w.4: Interest expense = w.3 - w.2 = $4,320 - $827 = $3.493
w.5: Premium on Bonds Payable = June 30 1 Unamortized Premium - December 31 Unamortized Premium = $7,444 - $6,617 = $827
w.6: Cash = $108,000 * 8% * (6 / 12) = $4,320
w.7: Interest expense = w.6 - w.5 = $4,320 - $827 = $3,493
