Bond Premium, Entries for Bonds Payable Transactions

Rodgers Corporation produces and sells football equipment. On July $1,$ Year $1,$ Rodgers Corporation issued $$69,900,000$ of $10-$year, $14\%$ bonds at a market $($effective$)$ interest rate of $13\%,$ receiving cash of $$73,751,189.$ Interest on the bonds is payable semiannually on December $31$ and June $30.$ The fiscal year of the company is the calendar year.

Required:

For all journal entries, If an amount box does not require an entry, leave it blank.

Question Content Area

$1.$ Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July $1,$ Year $1.$

blank

Cash

$73,751,189$

$0$

Premium on Bonds Payable

$0$

$3,851,189$

Bonds Payable

$0$

$69,900,000$

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Feedback

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

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$2.$ Journalize the entries to record the following:

a$.$ The first semiannual interest payment on December $31,$ Year $1,$ and the amortization of the bond premium, using the straight$-$line method. Round to the nearest dollar.

blank

Interest Expense

$4,700,441$

$0$

Premium on Bonds Payable

$192,559$

$0$

Cash

$0$

$4,893,000$

Feedback Area

Feedback

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

The straight$-$line method of amortization provides equal amounts of amortization over the life of the bond.

Question Content Area

b$.$ The interest payment on June $30,$ Year $2,$ and the amortization of the bond premium, using the straight$-$line method. Round to the nearest dollar.

blank

Interest Expense

$4,700,441$

$0$

Premium on Bonds Payable

$192,559$

$0$

Cash

$0$

$4,893,000$

Feedback Area

Feedback

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

The straight$-$line method of amortization provides equal amounts of amortization over the life of the bond.

Question Content Area

$3.$ Determine the total interest expense for Year $1.$ Round to the nearest dollar.

$fill in the blank $475144$ffbfb$505$e$\_1$

$4,700,441$

$4.$ Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest?

Yes

$5.$ Compute the price of $$73,751,189$ received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences.

Present value of the face amount $fill in the blank $475144$ffbfb$505$e$\_3$

$26,344,611$

Present value of the semiannual interest payments fill in the blank $475144$ffbfb$505$e$\_4$

$60,977,594$

Price received for the bonds $fill in the blank $475144$ffbfb$505$e$\_5$

$73,751,189$