Bonds Payable Journal Entries: Effective Interest Amortization On December 31, 2

Question

Bonds Payable Journal Entries: Effective Interest Amortization On December 31, 2014, Coffey Company issued $300,000 of 10 year, ten percent bonds payable for $340.771,yielding an effective interest rate of eight percent. Interest is payable semiannually on june 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds.(tb) the sem annual interest payment and prem um amortization effective interest method) on une 30, 2015, and (0 the semiannual interest payment and premium amortization on December 31, 2015. Round amounts to the nearest dollar General Journal Date Debit Credit Dec.31 Bonds Payable To record issuance of bonds Jun.30 Premium on Bonds Payable

Explanation / Answer

Amortization of Premium: Date Cash Interest Interest Expense Premium Unamortized Carrying Amortized Premium Value of bonds June 30 2015 15000 13631 1369 39402 339402 Dec 31 2015 15000 13576 1424 37978 337978 Journal Entries Date Accounts title and explanations Debit $ Credit $ Dec 31 2014 Cash Account Dr. 340771     Bonds payable Account 300000     Premium on Bonds payable 40771 June 30 2015 Bond interest Expense Dr. 13631 Premium on Bonds payable Dr. 1369       Cash Account 15000 Dec 31 2015 Bond interest Expense Dr. 13576 Premium on Bonds payable Dr. 1424       Cash Account 15000

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