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On the first day of the fiscal year, a company issues a $7,200,000, 9%, 5-year bond...

On the first day of the fiscal year, a company issues a $7,200,000, 9%, 5-year bond that pays semiannual interest of $324,000 ($7,200,000 × 9% × ½), receiving cash of $7,491,992.

Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

  

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Answer #1
Accounts Title and Explanation Debit Credit
Interest Expense       294,801
Premium on bonds payable          29,199
     Cash 324000
(To record interest expense )
Note 1: Calculation of Premium on bond
Issue Amount 7491992
Less: Face Value 7200000
Premium 291992
No. of year 5
No. of seminanual 10
Amortization per semiannual          29,199 (291992/10)
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