Answer and Explanation:
Given:
Sales price of bond = $260,148
Issue price of bond = $250,000
Total premium on bond = $260,148 - $250,000
Total premium on bond = $10,148
Number of year = 5 year = 5 × 2 semi-annual = 10
Per period payment = Total premium on bond / 10
Per period payment = $10,148 / 10 = $1,014.80
Cash paid = $250,000 × (9%/2) = $11,250
Journal Entry
Date Account Title and Explanation Debit Credit
Interest A\c Dr 10,235.20
Premium on Bond A\c Dr 1,014.80
Cash A\c Cr 11,250.00
Note: interest calculated from balancing figure
