Question

Need answer for below two journal entry:

2.   Prepare the January 1, 2018 journal entry for the initial issuance.

3.   Prepare the journal entries to record the first two interest payments.

Golf World, Inc., issued $240,000 of 6%, 15-year bonds dated January 1, 2018 that will pay interest semiannually on June 30 and December 31. These bonds were issued at

$198,494, and the market rate of interest was 8% at the issue date.

Answer 1

Solution:

Journal Entries - Golf World Inc.
Date	Particulars	Debit	Credit
01-Jan-18	Cash A/c Dr	$1,98,494
	Discount on Bond Payable Dr	$41,506
	To bonds payable		$2,40,000
	(Being bond issued at discount)
30-Jun-18	Interest Expense Dr ($198,494*8%*6/12)	$7,940
	To Discount on Bond Payable		$740
	To Cash ($240,000*6%*6/12)		$7,200
	(To record first payment of Interest and Amorization of discount on issue)
31-Dec-18	Interest Expense Dr ($198494+740)*8%*6/12	$7,969
	To Discount on Bond Payable		$769
	To Cash ($240,000*6%*6/12)		$7,200
	(To record second payment of Interest and Amorization of discount on issue)