1. Amortization of discount or premium.

Grider Industries, Inc. issued $15,000,000 of 8% debentures on May 1, 2020 and received cash totaling $13,308,942. The bonds pay interest semiannually on May 1 and November 1. The maturity date on these bonds is November 1, 2028. The firm uses the effective-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective-interest rate of 10%.

Instructions

Prepare journal entries for the initial issuance of the bond on May 1, 2020, the first interest payment on November 1, 2020 and the second interest payment on May 1, 2021

2. Entries for bonds payable.

Prepare the necessary journal entries to record the following transactions relating to the long-term issuance of bonds of Pitts Co.:

June 1, 2021

Issued $4,000,000 face value Pitts Co. 8% bonds for $4,360,800,Interest is payable semiannually on December 1 and June 1 . Effective interest rate is 7 %

December 1, 2021

Paid semiannual interest on Pitts Co. bonds. (Use effective interest method)

June 1, 2022

Paid semiannual interest on Pitts Co. bonds