Question

On February 1, 2018, Strauss-Lombardi issued 10% bonds, dated February 1, with a face amount of $930,000. The bonds sold for $855,382 and mature on January 31, 2038 (20 years). The market yield for bonds of similar risk and maturity was 11%. Interest is paid semiannually on July 31 and January 31. Strauss-Lombardi’s fiscal year ends December 31. Required: 1. to 4. Prepare the journal entry to record their issuance by Strauss-Lombardi on February 1, 2018, interest on July 31, 2018 (at the effective rate), adjusting entry to accrue interest on December 31, 2018 and interest on January 31, 2019. (Do not round your intermediate calculations and round your final answers to nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1-Feb	Cash	855382
	Discount on bonds payable	74618
	Bonds payable		930000
31-Jul	Interest expense	47046		=855382*11%/2
	Discount on bonds payable		546
	Cash		46500	=930000*10%/2
31-Dec	Interest expense	39230		=(855382+546)*11%/12*5
	Discount on bonds payable		480
	Interest payable		38750	=930000*10%/12*5
31-Jan	Interest expense	7846		=(855382+546)*11%/12*1
	Interest payable	38750
	Discount on bonds payable		96
	Cash		46500