Impact of a Premium Assume the same set of facts for Berol Corporation as in Exercise 10-16…

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Impact of a Premium

Assume the same set of facts for Berol Corporation as in Exercise 10-16 except that it received

$109,862 in return for the issuance of the bonds when the market rate was 8%.

Required

1. Prepare the journal entry to record the sale of the bonds on January 1, 2008, and the proper

balance sheet presentation on this date.

2. Prepare the journal entry to record interest expense on December 31, 2008, and the proper

balance sheet presentation on this date.

3. Explain why the company was able to issue the bonds for $109,862 rather than for the face

amount.

 

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