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shamrock, inc. issues $3.5 million, 5-year, 12% bonds at 104, with interest payable on january 1. the straight-line method is used to amortize bond premium.

Respuesta :

The premium amount will be $140,000

As given in the question, the par value will be $100 per share.

So the issuing price = $3500000 * 104/100 = $3640000

Hence the premium amount is = $(3640000-3500000)

                                                   = $140,000

The Journal entry for this transaction will be,

Bank.    Dr. $3640000

12% Bond.    Cr. $3500000

Premium on the issue. Cr.    $140,000

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