[droy1403]

Hello. I've been trying to figure this question out all day, but I can't make sense of the first couple journal entries. The question states:

On April 1, 2008, Company issued $600,000, 9% bonds for $645, 442 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2018. So the way I started the entry was:

April 1, 2008
DR Cash 645,442
CR Interest Payable (600,000 *.09*3/12)
CR Bonds Payable 631,942 (to balance)

Is this right?

Then on December 31, 2008 I would need to accrue interest expense, but I don't understand it. The way I calculated it ended up CR Bonds Payable, but shouldn't it be a DR because the bond was sold at a premium? Any help would be really appreciated!

[acctgwizard]

Credit bonds payable 600,000.
Credit premium on Bonds Payable 31,942.
Credit interest payable 13,500.