Question

Brief Exercise 14-6 On January 1, 2017, Coronado Corporation issued $640,000 of 9% bonds, due in 8 years. The bonds were issued for $605,318, and pay interest each July 1 and January 1. Coronado 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 10%.

Answer 1

1-Jan	Cash	605318
	Discount on bonds payable	34682
	Bonds payable		640000
1-Jul	Interest expense	30266		=605318*10%/2
	Discount on bonds payable		1466
	Cash		28800	=640000*9%/2
31-Dec	Interest expense	30339		=(605318+1466)*10%/2
	Discount on bonds payable		1539
	Interest payable		28800