Pina Company issued $2,500,000 face value of 12%, 20-year bonds at $2,928,977, a yield of 10%. Pina uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Required:
Prepare the journal entries.

Pina Company

Journal Entries:

Debit Cash $2,928,977

Credit 12% Bonds Payable $2,500,000

Credit Bonds Premium $428,977

To record the proceeds from the bonds issue, the bonds liability, and the premium.

June 30:

Debit Interest expense $146,449

Debit Amortization of premium $3,551

Credit Cash $150,000

To record the first interest payment and amortization of bonds premium.

December 31:

Debit Interest expense $146,271

Debit Amortization of Premium $3,729

Credit Cash $150,000

To record the second interest payment and amortization of bonds premium.

Explanation:

a) Data and Calculations:

Face value of 12% bonds = $2,500,000

Proceeds from bonds issue  2,928,977

Premium =                               $428,977

Coupon rate = 12%

Market yield rate = 10%

June 30:

Cash payment = $150,000 ($2,500,000 * 6%)

Interest expense $146,449 ($2,928,977 * 5%)

Amortized Premium  3,551 ($150,000 - $146,449)

Bonds value = $2,925,426 ($2,928,977 - $3,551)

December 31:

Cash Payment = $150,000 ($2,500,000 * 6%)

Interest expense $146,271 ($2,925,426)

Amortized premium 3,729 ($150,000 - $146,271)

Bonds value = $2,921,697 ($2,925,426 - $3,729)

answer: it is a cellular phone

since the options are not listed, when you are working on your budget you should also add water, tv, internet, miscellaneous and your 'fun' money for in your budget. when budgeting, you need to allow for fun money, and mis/accidental money so that you stick to the budget and not go crazy because you feel strapped to the budget.