RassignmentstakeAssign Bond Premium Entries for Bonds Payabl

R-assignments&takeAssign; Bond Premium, Entries for Bonds Payable Transactions Campbel Inc. produces and sells outdoor equipment. On July 1, Year 1, Campbell ssued $76,100,000f 10 equipment. On July 1, Year 1, Campbell issued $76,100,000 of 10- year, 10% bonds at a market (effective) inte bonds is payable semiannually on December 31 year. Required: rest rate of 9%, receiving cash of $81,049,316. Interest on the and June 30. The fiscal year of the company is the calendar If an amount box does not require an entry, leave it blank. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bands on July 1, Year 1. Cash Premium on Bonds Payable i 81049,316 76.100.000 Bonds Payable y Bonds Payable is a\'ways recorded at face value, Any differance in issue price is renected in a The straight-tine method of amortization provides equal amounts of amortization over the lte of the bond premium or discount account,

Solution

Journal

1) Date - On July 1, Year 1
Cash Dr 81049316
To 10% Bond 76100000 (cr)
To Premium on Bond 4949316 (cr)
(Being 10% bond issued at premium)

2) Date- On December 31, Year 1
Interest on Bonds (76100000*10%*6/12) Dr 3805000
To Cash 3805000 (Cr)
(Being interest expenses on bonds paid for half year )

3) Total Interest expense for Year 1 = 76100000*10%*6/12= 3805000

4) Bonds shall always be issued at premium when contracted rate is higher than than the market rate of return.

Notes-