Asked by Jordan Ratliff on May 03, 2024
Verified
On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000
($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.
Semiannual Interest
Interest that is calculated and paid twice a year, often on a bond or loan.
Bond Premium
The amount by which the market price of a bond exceeds its face value, usually occurring when the bond's interest rate is higher than the current market rate.
Straight-line Method
An accounting method of depreciating fixed assets where the asset's cost is evenly distributed over its useful life to allocate the expense of the asset over its lifespan.
- Delve into the foundational elements and operations involved in the generation of bonds, which include the allocation of interest and the gradual elimination of bond discounts and premiums.
Verified Answer
MJ
Learning Objectives
- Delve into the foundational elements and operations involved in the generation of bonds, which include the allocation of interest and the gradual elimination of bond discounts and premiums.