P10-11 (Algo) Recording and Reporting a Bond Issued at a Premium (with Premium Account) LO10-5

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Serotta Corporation is planning to issue bonds with a face value of $330,000 and a coupon rate of 16 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 12 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1)

Note: Use appropriate factor(s) from the tables provided.

P10-11 Part 1

1. Provide the journal entry to record the issuance of the bonds January 1.