Corporate Financial Accounting 14th Edition by Carl Warren,James Reeve,Jonathan Duchac

تمرين 38

Bond premium, entries for bonds payable transactions, interest method of amortizing bond premium
Campbell, Inc. produces and sells outdoor equipment. On July 1, Year 1. Campbell issued $25,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $26,625,925. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Instructions
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.
2. Journalize the entries to record the following:
A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.)
B. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.)
3. Determine the total interest expense for Year 1.