Long-Term Liabilities

Paris Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2019. The bonds were dated January 1 and pay interest annually on January 1. Paris Electric uses the straight-line method to amortize bond premium or discount. The bonds were sold at 104.

Instructions

1. Prepare the journal entry to record the issuance of the bonds on January 1, 2019.
2. Prepare a bond premium amortization schedule for the first 4 interest periods.
3. Prepare the journal entries for interest and the amortization for the premium in 2019 and 2020.
4. Show the balance sheet presentation of the bond liability at December 31, 2020.

Solution