Answer:
a)1/1/20 Cash $477,360
Bonds payable $468,000
Premium on Bonds payable $9,360
b)7/1/20 Interest expense $23,320
Premium on Bonds payable $80
Cash $23,400
c)12/31/20 Interest expense $23,315
Premium on Bonds payable $85
Interest payable $23,400
Explanation:
In order to prepare the journal entry to record the issuance of the bonds, we first have to calculate the cash, as follows:
Cash=$468,000×1.02=$477,360
Hence, the journal entry to record the issuance of the bonds would be as follows:
1/1/20 Cash $477,360
Bonds payable $468,000
Premium on Bonds payable $9,360
In order to prepare the journal entry to record the payment of interest and related amortization on July 1, 2020, we would have to calculate the interest expense and cash as follows:
Interest expense=$477,360×9.7705%/2=$23,320
Cash=$468,000*10%/2=$23,400
7/1/20 Interest expense $23,320
Premium on Bonds payable $80
Cash $23,400
In order to prepare the journal entry to record the accrual of interest and the related amortization on December 31, 2020. , we would have to calculate the interest expense and interest payable as follows:
Interest expense=($477,360-102)×9.7705%/2
=$23,315
Interest payable=$468,000*10%/2=$23,400
12/31/20 Interest expense $23,315
Premium on Bonds payable $85
Interest payable $23,400
