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 )
requirement 1. journalize the issuance of the bonds on january 1, 2025 (record debits first, then credits select explanations on the last line of the journal entry )

date
accounts and explanation
debit
credit
jan 1, 2025
cash
189,000
bonds payable
180,000
premium on bonds payable
9,000
issued bonds at a premium

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 )

date
accounts and explanation
debit
credit
jun 30, 2025

Explanation:

Step1: Calculate semi - annual interest payment

The formula for semi - annual interest payment is \(I = Face\ Value\times\frac{Annual\ Interest\ Rate}{2}\).
Given face value \(F = 180000\), annual interest rate \(r=15\%\) or \(0.15\).
\(I = 180000\times\frac{0.15}{2}=13500\)

Step2: Calculate semi - annual premium amortization

The premium on bonds payable is \(P=(105\%- 100\%)\times180000 = 9000\).
The number of periods \(n = 10\times2=20\) (semi - annual periods).
The formula for straight - line semi - annual premium amortization is \(A=\frac{Premium}{n}\).
\(A=\frac{9000}{20}=450\)

Step3: Calculate interest expense

The formula for interest expense is \(Interest\ Expense=Interest\ Payment - Premium\ Amortization\).
\(Interest\ Expense = 13500-450 = 13050\)

Answer:

Date	Accounts and Explanation	Debit	Credit
	Premium on Bonds Payable	450
	Cash		13500
	(To record semi - annual interest payment and premium amortization)