Question

Bonds Payable Journal Entries; Effective Interest Amortization
On December 31, 2014, Blair Company issued $600,000 of 20-year, 11 percent bonds payable for $480,015, yielding an effective interest rate of 14 percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2015, and (c) the semiannual interest payment and discount amortization on December 31, 2015. Round amounts to the nearest dollar.

General Journal
Date	Description	Debit	Credit
a.)
Dec.31	Cash	$Answer	$Answer
	AnswerCashDiscount on Bonds PayableBonds PayableBond Interest Expense	Answer	Answer
	AnswerCashDiscount on Bonds PayableBonds PayableBond Interest Expense	Answer	Answer
	To record issuance of bonds.
b.)
Jun.30	AnswerCashDiscount on Bonds PayableBonds PayableBond Interest Expense	Answer	Answer
	AnswerCashDiscount on Bonds PayableBonds PayableBond Interest Expense	Answer	Answer
	Cash	Answer	Answer
	To record semiannual interest payment and discount amortization.
c.)
Dec.31	AnswerCashDiscount on Bonds PayableBonds PayableBond Interest Expense	Answer	Answer
	AnswerCashDiscount on Bonds PayableBonds PayableBond Interest Expense	Answer	Answer
	Cash	Answer	Answer
	To record semiannual interest payment.

Answer 1

Journal entries :

Date	account and explanation	debit	credit
Jan 1	Cash	480015
	Discount on bonds payable	119985
	Bonds payable		600000
	(To record bond issue)
June 30	Interest expense (480015*7%)	33601
	Discount on bonds payable		601
	Cash (600000*5.5%)		33000
	(To record first interest)
Dec 31	Interest expense (480015+601)*7%	33643
	Discount on bonds payable		643
	Cash		33000
	(To record semiannual interest payment)

answered by: anonymous