Question

SHOW STEPS PLEASE

Shaggy company issued $225,000 of 10% bond on January 1, 2016, at 96. the bonds paid interest semi-annually on June 30 and December 31. the maturity date f the bonds is December 31, 2019.

1-prepare the journal entry to record the issuance of the bonds.

2 using the straight-line method prepare the journal entries to record the first two interest payments

Answer 1

1-prepare the journal entry to record the issuance of the bonds.

Date	accounts & explanation	debit	credit
2016 jan 1	Cash (225000*96/100)	216000
	Discount on bonds payable (225000*4/100)	9000
	Bonds payable		225000
	(To record issue bonds payable)

2 using the straight-line method prepare the journal entries to record the first two interest payments

Date	accounts & explanation	debit	credit
June 30, 2016	Interest expense	12375
	Discount on bonds payable (9000/8)		1125
	Cash (225000*10%*6/12)		11250
	(To record interest expense)
Dec 31, 2016	Interest expense	12375
	Discount on bonds payable (9000/8)		1125
	Cash		11250
	(To record interest expense)