Question

On October 1, 2015, Brimstone Company sold 12% bonds having a maturity value of $800,000 for $853,382 plus accrued interest, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2015, and mature January 1, 2020, with interest payable December 31 of each year. Prepare the journal entries at the date of the bond issuance and for the first interest payment.
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Answer 1

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Date	Account	Debit	Credit
Oct 1 2015	Cash	$       853,382
	Premium on Bond Payable		$     53,382
	Bond Payable		$   800,000
	(To record issuance of bond)
Dec 31 2015	Interest Expense ($853,382*10%*3/12)	$         21,335
	Premium on Bond Payable	$           2,665
	Cash ($800,000*12%*3/12)		$     24,000
	(To record payment of interest)