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Premium Amortization

On the first day of the fiscal year, a company issues an $3,800,000, 12%, 5-year bond that pays semiannual interest of $228,000 ($3,800,000 12% ), receiving cash of $4,093,425.

Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Interest Expense

Premium on Bonds Payable

Cash

Redemption of Bonds Payable

A $930,000 bond issue on which there is an unamortized premium of $80,000 is redeemed for $766,000.

Journalize the redemption of the bonds. If an amount box does not require an entry, leave it blank.

Bonds Payable

Premium on Bonds Payable

Gain on Redemption of Bonds

Cash

Entries for Issuing Bonds

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $390,000 of 20-year, 11% bonds on May 1 of the current year at face value,, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

May 1 Issued the bonds for cash at their face amount.

Nov. 1 Paid the interest on the bonds.

Dec. 31 Recorded accrued interest for two months.

Journalize the entries to record the above selected transactions for the current year.

May 1

Cash

Bonds Payable

Nov. 1

Interest Expense

Cash

Dec. 31

Interest Expense

Interest Payable

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