Amortize The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their face amount Premium by Interest Method Shunda Corporation wholesales parts to appliance manufacturers On January 1, Shunda issued $22,000,000 of five year, 9 A form of an interest bearing note used by corporations to borrow on a long term basis bonds at a market (effective) interest rate of 7 , receiving cash of $23,829,684 Interest is payable semiannually Shundas fiscal year begins on January 1 The company uses the interest method a Journalize the entries to record the following 1 Sale of the bonds Round amounts to the nearest dollar For a compound transaction, if an amount box does not require an entry, leave it blank Cash Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Premium on Bonds Payable Premium on Bonds Payable Accounts Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Premium on Bonds Payable Bonds Payable Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Feedback Bonds Payable is always recorded at face value Any difference in issue price is reflected in a premium or discount account 2 First semiannual interest payment, including amortization of premium Round to the nearest dollar For a compound transaction, if an amount box does not require an entry, leave it blank Interest Expense Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Premium on Bonds Payable Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Payable Premium on Bonds Payable Cash Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Premium on Bonds Payable Feedback As the discount or premium is amortized, the carrying amount of the bond changes As a result, interest expense also changes each period Compare the rate on the bonds and the market rate 3 Second semiannual interest payment, including amortization of premium Round to the nearest dollar For a compound transaction, if an amount box does not require an entry, leave it blank Interest Expense Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Payable Interest Expense Premium on Bonds Payable Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Payable Premium on Bonds Payable Cash Bonds Payable Cash Discount on Bonds Payable Interest Payable Interest Expense Premium on Bonds Payable Feedback As the discount or premium is amortized, the carrying amount of the bond changes As a result, interest expense also changes each period Compare the rate on the bonds and the market rate b Determine the bond interest expense for the first year Enter amounts as positive numbers Round amounts to the nearest dollar Annual interest paid $ Less premium amortized Interest expense for first year $

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Amortize The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their

Amortize The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their face amount.Premium by Interest Method

Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued $22,000,000 of five-year, 9% A form of an interest-bearing note used by corporations to borrow on a long-term basis.bonds at a market (effective) interest rate of 7%, receiving cash of $23,829,684. Interest is payable semiannually. Shundas fiscal year begins on January 1. The company uses the interest method.

a. Journalize the entries to record the following:

1. Sale of the bonds. Round amounts to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Cash Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Premium on Bonds Payable
	Premium on Bonds Payable Accounts Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Premium on Bonds Payable
	Bonds Payable Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable

Feedback

Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account.

2. First semiannual interest payment, including amortization of premium. Round to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Interest Expense Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable
	Premium on Bonds Payable Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Payable Premium on Bonds Payable
	Cash Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Payable Premium on Bonds Payable

Feedback

As the discount or premium is amortized, the carrying amount of the bond changes. As a result, interest expense also changes each period.

Compare the rate on the bonds and the market rate.

3. Second semiannual interest payment, including amortization of premium. Round to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Interest Expense Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Payable Interest Expense
	Premium on Bonds Payable Accounts Payable Bonds Payable Cash Discount on Bonds Payable Interest Payable Premium on Bonds Payable
	Cash Bonds Payable Cash Discount on Bonds Payable Interest Payable Interest Expense Premium on Bonds Payable