Untitled Document35

Untitled Document35 - ($1,246 20 say $62 every six months...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
As with discount amortization, the amortization of premium may be done using  the straight-line or effective interest method. The  straight-line method  spreads the  $1,246 premium account's balance evenly over the 20 semiannual interest  payments made for the bonds. This method divides the total premium by the  number of interest payments to determine the reduction in interest expense to be  recognized semiannually. In this case, interest expense will be reduced by $62.30 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ($1,246 ÷ 20), say $62, every six months. The entry for the first interest payment would be as follows: General Journal Date Account Title and Description Ref. De bit Cre dit Dec. 31 Interest Expense 53 8 Premium on Bonds Payable ($11,246 ÷ 20) 62 Cash ($10,000 × 12% × 6 / 12 ) 600 Pay semiannual interest (using straight-line amortization)...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online