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Problem - Entries for Issuing Bonds and Amortizing Premium

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Problem - Entries for Issuing Bonds and Amortizing Premium by Straight-line Method

McCool Corporation wholesales repair products to equipment manufacturers. On April 1, 2010, McCool Corporation issued $30,000,000 of five-year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $32,446,500. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following:

a. Sale of bonds on April 1, 2012.

b. First interest payment on October 1, 2012, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar.)

c. Explain why the company was able to issue the bonds for $32,446,500 rather than for the face amount of $30,000,000.

Reference no: EM132683568

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