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    Entries for Bond Transactions Aumont Company

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    E14-10 (Entries for Bond Transactions) On January 1, 2007, Aumont Company sold 12% bonds having a maturity value of $500,000 for $537,907.37, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2007, and mature January 1, 2012, with interest payable December 31 of each
    year. Aumont Company allocates interest and unamortized discount or premium on the effective interest basis.

    Instructions
    (a) Prepare the journal entry at the date of the bond issuance.
    (b) Prepare a schedule of interest expense and bond amortization for 2007â?"2009.
    (c) Prepare the journal entry to record the interest payment and the amortization for 2007.
    (d) Prepare the journal entry to record the interest payment and the amortization for 2009.

    I am especially interested in how to calculate the Premium on bonds payable in parts c and d.

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    Solution Preview

    The journal entries are based on the bond amortization schedule. See the Excel spreadsheet where ...

    Solution Summary

    The journal entries are based on the bond amortization schedule. See the Excel spreadsheet where I show you how to construct this. Each column has a note telling you what belongs in that column. Click in each cell to see the computation. The entries are then created by pointing at the relevant amount in the amortization schedule. This is a template that you can now use for any bond problem.

    $2.19