Question

On January 1, 2020, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,231, and pay interest each July 1 and January 1. JWS uses the effective-interest method. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%.

No.	Date	Account Titles and Explanation	Debit	Credit
(a)

(b)

(c)

Answer 1

Journal Entries of JWS Corporation

No	Date	Account Titles and Explanation	Debit	Credit
(a)	01-Jan-20	Cash Dr Discount on bond Payable Dr To Bond Payable (to record issue of bonds)	$559,231.00 $40,769.00	$600,000.00
(b)	01-Jun-20	Interest Expense Dr(559,231*8%*6/12) To Discount on Bonds Payable To Cash ($600,000*7%*6/12) (Being first semiannual interest payment made and discount amortized)	$22,369.00	$1,369.00 $21,000.00
(c)	31-Dec-20	Interest Expense Dr[(559,231+1369)*4%] To Discount on bonds payable To Interest Payable (Being first semiannual interest accrued and discount amortized)	$22,424.00	$1,424.00 $21,000.00