Question

RKO Company sold bonds with a face value of $850,000 for $909,701. The bonds have a...

RKO Company sold bonds with a face value of $850,000 for $909,701. The bonds have a coupon rate of 8 percent, mature in 10 years, and pay interest annually every December 31.

All of the bonds were sold on January 1 of this year. Using a premium account, record the sale of the bonds on January 1 and the payment of interest on December 31 of this year. RKO uses the effective-interest amortization method. Assume an annual market rate of interest of 7 percent.

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Journal of RKO Company

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