Jarhead Corporation wholesales oil and grease products to equipment manufacturers. On March 1, 2008, Jarhead Corporation issued
Question:
Jarhead Corporation wholesales oil and grease products to equipment manufacturers. On March 1, 2008, Jarhead Corporation issued $2,500,000 of five-year, 13% bonds at an effective interest rate of 11%, receiving cash of $2,688,440. Interest is payable semiannually on March 1 and September 1. Jarhead Corporation's fiscal year begins on March 1.
a. Journalize the entries to record the following:
1. Sale of the bonds.
2. First interest payment on September 1, 2008. (Amortization of premium is to be recorded annually.)
3. Second interest payment on March 1, 2009.
4. Amortization of premium at the end of the first year, using the interest method. (Round to the nearest dollar.)
b. Determine the bond interest expense for the first year.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Accounting
ISBN: 978-0324401844
22nd Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac