Discuss the below:
BONDS ISSUED AT A PREMIUM Bunkichi
Q: Corporation issued the following bonds at a premium:
Date of issue and sale: ................March 1, 20-1
Principal amount: ......................$800,000
Sale price of bonds: ...................103
Denomination of bonds: ..............$1,000
Life of bonds: ..........................10 years
Stated rate: ..............................8%, payable semiannually on August
.............................................31 and February 28
REQUIRED
Q1. Prepare journal entries for:
(a) Issuance of the bonds at a premium.
(b) Interest payment and premium amortization on the bonds on August 31, 20-1.
(c) Year-end adjustment on the bonds for 20-1.
(d) Reversing entry for the beginning of 20-2.
(e) Interest payments and premium amortization on the bonds for 20-2 (February 28 and August 31).
Q2. Calculate the carrying value of the bonds on August 31, 20-2.