January 2014 issued 6000000 8 5 year bonds Prepare journal e

January 2014 issued $6,000,000, 8% 5 year bonds.

Prepare journal entries to show

- Issance of bonds on Jan 1, 2014 receiving $16,511,788 cash

- Accrual of bond interest and recognition of amortization on Dec 31, 2014

Solution

Journal entries Date Accounts title and explanation Debit $ Credit $ Jan1 2014 Cash account Dr. 6,511,788      Bonds payable 6,000,000      Premium on Bonds payable 511,788 Dec 31 2014 Interest expense Account Dr. 377642.4 Premium on Bonds payble Dr. (511788/5) 102357.6     Cash account (6000,000*8%) 480000