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2 May, 01:11

The Gorman Group issued $900,000 of 13% bonds on June 30, 2016, for $967,707. The bonds were dated on June 30 and mature on June 30, 2036 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually on December 31 and June 30.

Required:

Complete the below table to record the company's journal entry. (Enter interest rate to 1 decimal place. (i. e. 0.123 should be entered as 12.3).)

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  1. 2 May, 01:33
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    cash 967,707 debit

    premium on BP 67,707 credit

    Bnds Payable 900,000 credit

    interest expense 58062.42 debit

    premium on BP 437.58 debit

    cash 58500 credit

    Explanation:

    procceds 967,707

    face value 900,000

    premium on bonds payable 67,707

    first interest payment

    carrying value x market rate

    967,707 x 0.06 = 58062.42

    then cash outlay

    face valeu x bond rate

    900,000 x 0.065 = 58,500

    the difference will be the amortization
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