Campbell, Inc. produces and sells outdoor equipment. On July 1, Year 1. Campbell issued $84,100,000 of 10-year, 8% bonds at a market (effective) interest rate of 6%, receiving cash of $96,612,297. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

1.

Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.*

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 interest method. (Round to the nearest dollar.)
b.	The interest payment on June 30, Year 2, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.)

3.

Determine the total interest expense for Year 1.

*Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

Campbell, Inc.

General Ledger

ASSETS

110 Cash

111 Petty Cash

121 Accounts Receivable

122 Allowance for Doubtful Accounts

126 Interest Receivable

127 Notes Receivable

131 Merchandise Inventory

141 Office Supplies

142 Store Supplies

151 Prepaid Insurance

191 Land

192 Store Equipment

193 Accumulated Depreciation-Store Equipment

194 Office Equipment

195 Accumulated Depreciation-Office Equipment

LIABILITIES

210 Accounts Payable

221 Salaries Payable

231 Sales Tax Payable

232 Interest Payable

241 Notes Payable

251 Bonds Payable

252 Discount on Bonds Payable

253 Premium on Bonds Payable

EQUITY

311 Common Stock

312 Paid-In Capital in Excess of Par-Common Stock

315 Treasury Stock

321 Preferred Stock

322 Paid-In Capital in Excess of Par-Preferred Stock

331 Paid-In Capital from Sale of Treasury Stock

340 Retained Earnings

351 Cash Dividends

352 Stock Dividends

390 Income Summary

REVENUE

410 Sales

610 Interest Revenue

611 Gain on Redemption of Bonds

EXPENSES

510 Cost of Merchandise Sold

515 Credit Card Expense

516 Cash Short and Over

521 Sales Salaries Expense

522 Office Salaries Expense

531 Advertising Expense

532 Delivery Expense

533 Repairs Expense

534 Selling Expenses

535 Rent Expense

536 Insurance Expense

537 Office Supplies Expense

538 Store Supplies Expense

541 Bad Debt Expense

561 Depreciation Expense-Store Equipment

562 Depreciation Expense-Office Equipment

590 Miscellaneous Expense

710 Interest Expense

711 Loss on Redemption of Bonds

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.

2a. Journalize the entry to record the first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.)

Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6

2b. Journalize the entry to record the interest payment on June 30, Year 2, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.)

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3		3. Determine the total interest expense for Year 1.