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To record the issuance of bonds at a premium, let's break down the given information:

- **Face Value of Bonds:** $5,300,000
- **Term of Bonds:** 10 years
- **Stated Interest Rate:** 4%
- **Issuance Price:** 102 (which means 102% of face value, or 1.02 x $5,300,000)
- **Interest Payment:** Annually on January 1

### Step 1: Calculate the Issuance Price
Since the bonds were issued at 102, they were sold at a premium:
\[
\text{Issuance Price} = 5,300,000 \times 1.02 = 5,406,000
\]

### Step 2: Determine the Premium on Bonds Payable
The premium amount is the difference between the issuance price and the face value:
\[
\text{Premium} = 5,406,000 - 5,300,000 = 106,000
\]

### Step 3: Journal Entry on January 1, 2020
The journal entry to record this transaction is as follows:

| Account                   | Debit       | Credit       |
|---------------------------|-------------|--------------|
| Cash                      | $5,406,000  |              |
| Bonds Payable             |             | $5,300,000   |
| Premium on Bonds Payable  |             | $106,000     |

### Explanation
- **Cash** is debited for the total cash received ($5,406,000).
- **Bonds Payable** is credited for the face value of the bonds ($5,300,000).
- **Premium on Bonds Payable** is credited for the premium amount ($106,000), which will be amortized over the bond’s life.

Would you like further details on how the premium is amortized over time, or do you have any other questions?

---

1. How is the premium on bonds amortized over the bond’s life?
2. How would the journal entry change if the bonds were issued at a discount instead?
3. What is the impact of issuing bonds at a premium on the financial statements?
4. How often would the interest expense be recorded for these bonds?
5. What would the entry look like for the first interest payment?

**Tip:** Bond premiums are amortized over the life of the bond, reducing the interest expense reported each period.

On January 1, 2020, Sheridan Company issued $5,300,000, 10-year, 4% bonds at 102. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2020 is:

Understand how to record the issuance of a $5,300,000 bond at a premium, issued by Sheridan Company on January 1, 2020, with a 4% interest rate. This solution covers bond accounting concepts and calculations, including the issuance price and premium on bonds payable.

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