Jarhead Corporation wholesales oil and grease products to equipment manufacturers. On March 1, 2008, Jarhead Corporation issued
Question:
Jarhead Corporation wholesales oil and grease products to equipment manufacturers. On March 1, 2008, Jarhead Corporation issued \(\$ 2,500,000\) of five-year, \(13 \%\) bonds at an effective interest rate of \(11 \%\), receiving cash of \(\$ 2,688,440\). Interest is payable semiannually on March 1 and September 1. Jarhead Corporation's fiscal year begins on March 1.
a. Journalize the entries to record the following:
1. Sale of the bonds.
2. First interest payment on September 1, 2008. (Amortization of premium is to be recorded annually.)
3. Second interest payment on March 1, 2009.
4. Amortization of premium at the end of the first year, using the interest method. (Round to the nearest dollar.)
b. Determine the bond interest expense for the first year.
objs. 2, 3
Step by Step Answer:
Financial Accounting
ISBN: 9780324380675
10th Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac