The gorman group issued $900,000 of 13% bonds on june 30, 2021, for $967,707. the bonds were dated on june 30 and mature on june 30, 2041 (20 years). the market yield for bonds of similar risk and maturity is 12%. interest is paid semiannually on december 31 and june 30.
required:
1. record the company's journal entry.

The Journal entries are as follows:

(i) On June 30,

Cash A/c                Dr. $967,707

To Bonds payable                          $900,000

To premium on bonds payable     $67,707  

(To record the issuance)

(ii) On December 31,

Interest expense A/c                   Dr. $58,062.4

Premium on bonds payable A/c Dr. $437.6

To cash                                                                  $58,500

(To record the interest on December 31, 2021)

Notes:

Interest expense = $967,707 × 6%

                             = $58,062.4

Cash = $900,000 × 6.5%

        = $58,500

(iii) On June 30,

Interest expense A/c                   Dr. $58,036.2

Premium on bonds payable A/c Dr. $463.8

To cash                                                                  $58,500

(To record the interest on June 30, 2022)

Notes:

Interest expense = ($967,707 - $438) × 6%

                             = $58,036.2

Cash = $900,000 × 6.5%

        = $58,500

a

explanation:

reducti0n

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