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    mennia's Avatar
    mennia Posts: 8, Reputation: 1
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    #1

    Feb 9, 2009, 06:57 PM
    Bonds issued at a discount and premium-effective interest method
    Wayman Corporation issued bonds twice during 2007. Transacations were as follows:

    2007
    Jan. 1 -Issued $2,000,000 of 9.2 percent, ten year bonds dated January 1, 2007, with interest payable on June 30 and December 31. The bonds were sold at 98.1, resulting in an effective interest rate of 9.5 percent.

    April 1 -Issued $4,000,000 of 9.8 percent, ten year bonds dated April 1, 2007, with interest payable on March 31 and September 30. The bonds were sold at 101, resulting in an effective interest rate of 9.5 percent.

    June 30 -Paid semiannual interest on the January 1 issue and amortized the discount, using the effective interest method.

    Sept. 30 -Paid semiannual interest on the April 1 issue and amortized the premium, using the effective interest method.

    Dec. 31 -Paid semiannual interest on the January 1 issue and amortized the discount, using the effective interest method.

    Dec 31 - Made an end of year adjusting entry to accrue interest on the April 1 issue and to amortize half the premium applicable to the second interest period.

    2008
    March 31 -Paid semiannual interest on the April 1 issue and amortized the premium applicable to the second half of the second interest period.

    Please help me to understand this... please explain
    mennia's Avatar
    mennia Posts: 8, Reputation: 1
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    #2

    Feb 9, 2009, 06:58 PM
    It's to be prepared as a journal entry...
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #3

    Feb 11, 2009, 05:24 PM

    Do your work first, then we will try to help you.
    acctjay's Avatar
    acctjay Posts: 2, Reputation: 1
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    #4

    Nov 9, 2010, 10:21 AM
    Quote Originally Posted by mennia View Post
    Wayman Corporation issued bonds twice during 2007. Transacations were as follows:

    2007
    Jan. 1 -Issued $2,000,000 of 9.2 percent, ten year bonds dated January 1, 2007, with interest payable on June 30 and December 31. The bonds were sold at 98.1, resulting in an effective interest rate of 9.5 percent.

    April 1 -Issued $4,000,000 of 9.8 percent, ten year bonds dated April 1, 2007, with interest payable on March 31 and September 30. The bonds were sold at 101, resulting in an effective interest rate of 9.5 percent.

    June 30 -Paid semiannual interest on the January 1 issue and amortized the discount, using the effective interest method.

    Sept. 30 -Paid semiannual interest on the April 1 issue and amortized the premium, using the effective interest method.

    Dec. 31 -Paid semiannual interest on the January 1 issue and amortized the discount, using the effective interest method.

    Dec 31 - Made an end of year adjusting entry to accrue interest on the April 1 issue and to amortize half the premium applicable to the second interest period.

    2008
    March 31 -Paid semiannual interest on the April 1 issue and amortized the premium applicable to the second half of the second interest period.

    Please help me to understand this...please explain
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