Question

on january 1, 2025, daryl unlimited issues 15%, 10 - year bonds payable with a face value of $180,000. the bonds are issued at 105 and pay interest on june 30 and december 31. (assume bonds payable are amortized using the straight - line amortization method)
read the requirements.
requirement 2. journalize the semiannual interest payment and amortization of bond premium on june 30, 2025 (record debits first, then credits. select explanations on the last line of the journal entry)
requirement 3. journalize the semiannual interest payment and amortization of bond premium on december 31, 2025 (record debits first, then credits. select explanations on the last line of the journal entry)

Explanation:

Step1: Calculate the premium on bonds payable

The bonds are issued at 105. So the issue price is \(180000\times1.05 = 189000\). The premium is \(189000 - 180000=9000\).

Step2: Calculate the semi - annual premium amortization

The bonds have a 10 - year life, so the number of semi - annual periods \(n = 10\times2=20\). The semi - annual premium amortization is \(\frac{9000}{20}=450\).

Step3: Calculate the semi - annual interest payment

The annual coupon rate is 15%. The semi - annual coupon rate is \(\frac{15\%}{2}=7.5\%\). The semi - annual interest payment is \(180000\times7.5\%=13500\).

Step4: Calculate the semi - annual interest expense

The semi - annual interest expense is the semi - annual interest payment minus the semi - annual premium amortization. So, \(13500 - 450=13050\).

For the journal entry on December 31, 2025:

Date	Accounts and Explanation	Debit	Credit
	Premium on Bonds Payable	450
	Cash		13500
	(Paid semiannual interest and amortized premium)

Answer:

Date	Accounts and Explanation	Debit	Credit
	Premium on Bonds Payable	450
	Cash		13500
	(Paid semiannual interest and amortized premium)