Lerner Corporation wholesales repair products to equipment manufacturers. On April 1, 2019, Lerner Corporation issued S12,000,000 of five-year, 8% bonds at a market (effective) interest rate of 6%, receiving cash of $13,023,576. Interest is payable semiannually on April 1 and October 1. A. Journalize the entries to record the following. 1. Issuance of bonds on April 1. 2019. 2. First interest payment on October 1, 2019, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar) B. Explain why the company was able to issue the bonds for $13,023,576 rather than for the face mount of $12,000,000 Post Date Apr Description Cash Premium on Bonds Payable Bonds Payable 1 2 3 4 5 6 7 8 9 Debit Credit 13,023,576 1 1,023,576 2 12,000,000 3 4 377,642 5 102,538 6 480,000 7 8 9 Oct 1 Interest Expense Premium On Bonds Payable Cash Bond Redemption Carrying Amount: = Bond Payable balance Less Discount on Bonds Payable Balance OR -Bond Payable balance Plus Premium on Bonds Payable Balance At Tem end the carrying Amount is equal to the Bond Payable Face All Discount and Premium balances are now at 0 because they were fully amortized and the investors are paid the face amount of the bond. Date Description Debit Credit Post 1 2 3 1 2 3 I If Callable bonds are redeemed early, depending on the Market Rate of interest at the date the bond is called, the company may have to pay more or less than the carrying amount of the bond. If the amount paid to redeem the bonds is > Carrying Amount then book Loss Lerner Corporation wholesales repair products to equipment manufacturers. On April 1, 2019, Lerner Corporation issued S12,000,000 of five-year, 8% bonds at a market (effective) interest rate of 6%, receiving cash of $13,023,576. Interest is payable semiannually on April 1 and October 1. A. Journalize the entries to record the following. 1. Issuance of bonds on April 1. 2019. 2. First interest payment on October 1, 2019, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar) B. Explain why the company was able to issue the bonds for $13,023,576 rather than for the face mount of $12,000,000 Post Date Apr Description Cash Premium on Bonds Payable Bonds Payable 1 2 3 4 5 6 7 8 9 Debit Credit 13,023,576 1 1,023,576 2 12,000,000 3 4 377,642 5 102,538 6 480,000 7 8 9 Oct 1 Interest Expense Premium On Bonds Payable Cash Bond Redemption Carrying Amount: = Bond Payable balance Less Discount on Bonds Payable Balance OR -Bond Payable balance Plus Premium on Bonds Payable Balance At Tem end the carrying Amount is equal to the Bond Payable Face All Discount and Premium balances are now at 0 because they were fully amortized and the investors are paid the face amount of the bond. Date Description Debit Credit Post 1 2 3 1 2 3 I If Callable bonds are redeemed early, depending on the Market Rate of interest at the date the bond is called, the company may have to pay more or less than the carrying amount of the bond. If the amount paid to redeem the bonds is > Carrying Amount then book Loss
