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Homework answers / question archive / Amwaj Company issued 12
Amwaj Company issued 12. 10-year bonds with a par value of BD 1,000,000 on January 1, 2018. Interests to be paid semiannually on each june 30 and December 31. The bonds are ved at Bo 1.073,607 cash when the market rate for this bond is 10% Required Aj Prepare the journal entry to record the issuance of the bonds on January 1, 2016 m Prepare the journal entry to record the first semiannual interest payment on June 10, 2018 assume that Amwaj uses the straight-line method of amortization of any discount or premium Prepare the journal entry to record the retirement of the bonds at maturity assume that all interest payments have already been made) For the toolbar.pres ALT+F10 Por ALTEN+F10 (Mac).
A. Journal Entry for Issue of Bonds on January 1, 2018.
Jan 1, 2018 Cash 1073607
To Premium on Bonds Payable 73607
To Bonds Payable 1000000
B. Journal Entry for recording Interest Payment on June 30, 2018.
Amortizing Tho Premium
The premium of 73607 is amortized by using either the stralght=line method or the effective-interest method.
The Straight-line Method
Under the straight-line method, the premium of 73607 is amortized over 20 interest periods at a rate of 3680.35 (73607 / 20) per period. Thus the total Interest expense for each period is 116319.65, consisting of the 120000 cash interest less the premium amortization of 3680.35. The journal entry at June 30, 2018, and each interest payment date thereafter is:
June 30, 2018 Interest Expense 116319.65
Premium on Bonds Payable 3680.35
To Cash 120000
C. Journal Entry for retirement of Bonds at maturity
Jan 1, 2028 Bonds Payable 1000000
To Cash 1000000
