Polk Incorporated issued 127000 of 7 bonds on July 1 2016 fo

Polk Incorporated issued $127,000 of 7% bonds on July 1, 2016, for $131,944.18. The bonds were dated January 1, 2016, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 6%. Polk uses the effective interest method of amortization.

Required:

Prepare the journal entries to record the issue of the bonds on July 1, 2016, and the interest payments on December 31, 2016, and June 30, 2017. In addition, prepare a bond interest expense and premium amortization schedule for the bonds through June 30, 2017.

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Solution

Date Accounts title Dr Cr july 1 2016 Cash 131944.18 Premium on Bonds payable 4944.18 Bond payble 127000 Dec 31 2016 Interest Expense 3958.33 Premium on Bonds payable 486.67 Cash 4445.00 June 30 2017 Interest Expense 3943.73 Premium on Bonds payable 501.27 Cash 4445.00 Amortization Schedule A B C D E F G               $ Date Interest Payment @3.5% Interest expenses at 3%*G Amortization of Bond C-B cr, balance in the a/c Bond Premium a/c Credit balance in the Bond payable Carrying value of Bond F+E Credit cash Debit Interest Expense Bond Premium July 1 2016 4944.18 127000 131944.18 Dec,31 2016 4445 3958 487 4458 127000 131458 June 30,2017 4445 3944 501 3956 127000 130956 Dec,31 2017 4445 3929 516 3440 127000 130440 If any doubt please comment