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On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010,...

On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010, a yield of 12%. Novak uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

Prepare the journal entries to record the following transactions:

1.) The issuance of bonds on June 30, 2017.

2.) The payment of interest and the amortization of the premium on December 31, 2017.

3.) The payment of interest and the amortization of the premium on June 30, 2018.

4.) The payment of interest and the amortization of the premium on December 31, 2018
Business   Accounting   
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Answer #1

Journal entries

Date account and explanation debit credit
June 30 Cash 4731010
Bonds payable 4400000
Premium on bonds payable 331010
Dec 31 Interest expense (4731010*6%) 283861
Premium on bonds payable 2139
Cash (4400000*6.5%) 286000
June 30 Interest expense (4728871*6%) 283732
Premium on bonds payable 2268
Cash 286000
Dec 31 Interest expense (4726603*6%) 283596
Premium on bonds payable 2404
Cash 286000
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