Question

On December 31, 2019, Spearmint, Inc., issued $450,000 of 9 percent, 3-year bonds for cash of $461,795. After recording the related entry, Bonds Payable had a balance of $450,000 and Premium on Bonds Payable had a balance of $11,795. Spearmint uses the straight-line bond amortization method. The first semiannual interest payment was made on June 30, 2020. Prepare journal entry for June 30, 2020.

Answer 1

Answer:

Explanation:

Cash Payment to customers: $450,000 x contract rate of 9% x 1/2 = $20,250

Amortization of the premium: $11,795/6 periods = $1,966

Bond interest Expense: $20,250 - $1966 = $18,284