Question

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On January 1, when the market interest rate was 9 percent, Seton Corporation completed a $260,000, 8 percent bond issue for $243,312. The bonds pay interest each December 31 and mature in 10 years. Assume Seton Corporation uses the effective-interest method to amortize the bond discount.

rev: 04_29_2019_QC_CS-166541

Required:

1. 1. & 2. Prepare the required journal entries to record the bond issuance and the first interest payment on December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar.)

Answer 1

Solution:

Journal Entries - Seton Corporation
Date	Particulars	Debit	Credit
1-Jan	Cash Dr	$243,312.00
	Discount on issue of bond Dr	$16,688.00
	To Bond Payable		$260,000.00
	(To record issue of bond at discount)
31-Dec	Interest expense Dr ($243,312*9%)	$21,898.00
	To Discount on issue of bond		$1,098.00
	To Cash		$20,800.00
	(To record interest expense and discount amortization)