Question

Polk Incorporated issued $200,000 of 13% bonds on July 1, 2016, for $206,801.60. The bonds were dated January 1, 2016, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 12%. Polk uses the effective interest method of amortization.Required:1. Prepare the journal entries to record the issue of the bonds on July 1, 2016, and the interest payments on December 31, 2016, and June 30, 2017. In addition, prepare a bond interest expense and premium amortization schedule for the bonds through June 30, 2017.

Answer 1

1.$200,000 ´ 0.13 ´ ½ year

2.Previous book value ´ 0.12 ´ ½ year

3.$13,000 –Amount from footnote b

4.Previous book value – Amount from footnote c

Step-by-step explanation:

Answer 2

Check the explanation

Step-by-step explanation:

Journal Entries

Date Accounts Debit$ Credit$

2016

Jul-01 Cash 206,801.60

Premium on Bonds Payable 6,801.60

Bonds Payable 200,000.00

Dec-31 Interest Expense 12,408.10

Premium on Bonds Payable 591.9

Cash 13,000.00

2017

Jun-30 Interest Expense 12,372.58

Premium on Bonds Payable 627.42

Cash 13,000.00

1.$200,000 ´ 0.13 ´ ½ year

2.Previous book value ´ 0.12 ´ ½ year

3.$13,000 –Amount from footnote b

4.Previous book value – Amount from footnote c