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Holly Company issued $1,500,000, 8%, 10-year, bonds. Interest to be paid semiannually. The market rate on...

Holly Company issued $1,500,000, 8%, 10-year, bonds. Interest to be paid semiannually. The market rate on bonds issue date was 6%.

Q1. Provide the journal that must be made on issue date of the bonds

Q2. Complete partial Schedule in the space provided on the Answers Sheets

Q3. Provide the necessary journal entry that company must make for 2nd interest payment on the bond

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Answer #1
Effective interest rate
8% 6%
Year Cash paid Interest expense Premium amortized Premium on bonds Carrying amount
223168 1723168
1st installment 60000 51695 8305 214863 1714863
2nd installment 60000 51446 8554 206309 1706309
Journal entries
Issue date Cash 1723168
       Premium on bonds payable 223168
        Bonds payable 1500000
1st installment Interest expense 51695
Premium on bonds payable 8305
           Cash 60000
2nd installment Interest expense 51446
Premium on bonds payable 8554
           Cash 60000
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