Question

in the first day of the fiscal year, a company issues an $948,000, 6%, five-year bond that pays semiannual interest of $28,440 ($948,000 x 6% x 1/2), receiving cash of $891,100. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

If an amount box does not require an entry, leave it blank.

Answer 1

Par value of bonds = $948,000

Bond issue price = $891,100

Discount on bonds payable = Par value of bonds - Bond issue price

= 948,000-891,100

= $56,900

Bond period = 5 years or 10 semi annual period

Semi annual amortization of bond discount = Discount on bonds payable/ Bond period

= 56,900/10

= $5,690

General Journal	Debit	Credit
Interest expense	$34,130
Discount on bonds payable		$5,690
Cash		$28,440
( To record semi annual interest payment)