Question

Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $67,000 for $73,566 on January...

Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $67,000 for $73,566 on January 1, 2018. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid semiannually on June 30 and December 31. 1. & 2. Record the bond issue and first interest payment on June 30, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Homework Answers

Answer #1

Solution:

Journal Entries
Date Particulars Debit Credit
01-Jan Cash A/c Dr $73,566
      To Premium on Bond payable $6,566
      To bonds payable $67,000
(Being bond issuance at discount)
30-Jun Interest Expense Dr ($73,566*6%*6/12) $2,207
Premium on bond Payable Dr $138
      To Cash ($67,000*7%*6/12) $2,345
(To Record the payment of interest)
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