Question

Brief Exercise 14-7 On January 1, 2017, Sweet Corporation issued $480,000 of 7% bonds, due in 10 years. The bonds were issued for $515,707, and pay interest each July 1 and January 1. The effective-interest rate is 6%.

Answer 1

1-Jan	Cash	515707
	Bonds payable		480000
	Premium on Bonds payable		35707
1-Jul	Interest Expense	15471		=515707*6%/2
	Premium on Bonds payable	1329
	Cash		16800	=480000*7%/2
31-Dec	Interest Expense	15431		=(515707-1329)*6%/2
	Premium on Bonds payable	1369
	Interest Payable		16800