6/30/y1, $5,000,000 face value bonds, with an 8% coupon rate, are issued to yield 5%. These...

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Solution:

Journal Entries
Date	Particulars	Debit	Credit
6/30/Y1	Cash Dr	$6,882,706.00
	To Bond Payable		$5,000,000.00
	To Premium on Bond Payable		$1,882,706.00
	(To record issue of bond at premium)

12/31/Y1	Interest expense Dr	$172,068.00
	Premium on bond payable Dr	$27,932.00
	To Cash		$200,000.00
	(To record interest payment and premium amortization)

6/30/Y2	Interest expense Dr	$171,369.00
	Premium on bond payable Dr	$28,631.00
	To Cash		$200,000.00
	(To record interest payment and premium amortization)

12/31/Y2	Interest expense Dr	$170,654.00
	Premium on bond payable Dr	$29,346.00
	To Cash		$200,000.00
	(To record interest payment and premium amortization)

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Other questions asked by students

6/30/y1, $5,000,000 face value bonds, with an 8%
coupon rate, are issued to yield 5%. These are 20-
year bonds, and they pay interest on June 30 and
December 31. These bonds were issued for $6,882,706.
Please record the following, using the effective interest
approach:
6/30/y1 issuance of the bonds.
12/31/y1 payment of interest.
6/30/y2 payment of interest.
12/31/y2 payment of interest.