On December 31, 2018, Spearmint, Inc., issued $450,000 of 9 percent, 3-year bonds for cash of $461,795. After recording the related entry, Bonds Payable had a balance of $450,000 and Premium on Bonds Payable had a balance of $11,795. Spearmint uses the straight-line bond amortization method. The first semiannual interest payment was made on June 30, 2019.

Complete the necessary journal entry for June 30, 2019 by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Question

Roy Mckenzie

Business

30 April, 02:04

On December 31, 2018, Spearmint, Inc., issued $450,000 of 9 percent, 3-year bonds for cash of $461,795. After recording the related entry, Bonds Payable had a balance of $450,000 and Premium on Bonds Payable had a balance of $11,795. Spearmint uses the straight-line bond amortization method. The first semiannual interest payment was made on June 30, 2019.

Complete the necessary journal entry for June 30, 2019 by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

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Rebecca Maxwell · Answer 1

The journal entry is shown below:

Bond interest expense A/c Dr $18,284

Premium on Bonds payable A/c Dr $1,966

To Cash A/c $20,250

(Being the first semiannual interest payment is recorded)

The computation is shown below:

For cash account:

= $450,000 * 9% : 2

= $20,250

For Premium on Bonds payable

= $11,975 : 6

= $1,996

Since in semi-annual, the interest rate is half and the time period is doubled. The same is shown