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29 December, 11:37

A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Using the straight-line method, prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium. (Round amounts to the nearest whole dollar)

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  1. 29 December, 12:38
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    The Journal entries are as follows:

    (1)

    Cash A/c Dr. $484,087

    Discount on Bonds Payable A/c Dr. $15913

    To Bonds Payable (a liability account) $500,000

    (To record the first semiannual interest payment)

    Workings:

    Discount on bonds = 500,000 - 484,087

    = 15,913

    2.

    Bonds payable A/c Dr. $200,000

    To Cash 200,000

    (To record the amortization of any bond discount)
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