Question

13- Seed Corporation issued $200,000 of 8% bonds at 99 on January 1, 2018. Interest is to be paid annually on December 31.

a) Prepare the Journal entry to record the issuance of the bond.

Date	Description	Debit	Credit

b) Prepare the jornal entry for the straight-line amortization of the discount and the payment of the interest on December 31, 2018.

Date	Description	Debit	Credit

c) Prepare the jornal entry for the straight-line amortization of the Discount and the payment of the interest on December 31, 2019.

Date	Description	Debit	Credit

d) What will be the balance of the bond principal due on December 31, 2027?

Answer 1

	Account	Debit	Credit
a	Cash	198,000
	Discount on bonds payable	2,000
	Bonds payable		200,000
b	Interest expense	16,200
	Cash		16,000
	Discount on bonds payable		200
c	Interest expense	16,200
	Cash		16,000
	Discount on bonds payable		200
d	Balance	200,000

Straight line amortization = 2000/10 = 200