Question 14.5: Issuing Bonds at a Premium On the first day of the fiscal ye...

Financial Accounting

Issuing Bonds at a Premium

On the first day of the fiscal year, a company issues a $2,000,000, 12%, five-year bond that pays semiannual interest of $120,000 ($2,000,000 × 12% × ½), receiving cash of $2,154,440. Journalize the bond issuance.

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Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,154,440

Premium on Bonds Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,440

Bonds Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000

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