Accounting 26th Edition by Carl Warren,James Reeve,Jonathan Duchac

تمرين 15

Entries for issuing bonds and amortizing premium by straight-line method
Lerner Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Lerner Corporation issued $12,000,000 of five-year, 8% bonds at a market (effective) interest rate of 6%, receiving cash of $13,023,576. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following:
a. Issuance of bonds on April 1, 2016.
b. First interest payment on October 1, 2016, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar.)
c. Explain why the company was able to issue the bonds for $13,023,576 rather than for the face amount of $12,000,000.