Question

Paulson Company issues 6%, four-year bonds, on December 31, 2017, with a par value of $95,000 and semiannual interest payments.

Semiannual Period-End			Unamortized Discount			Carrying Value
(0)	12/31/2017		$	6,633		$	88,367
(1)	6/30/2018			5,804			89,196
(2)	12/31/2018			4,975			90,025

     
Use the above straight-line bond amortization table and prepare journal entries for the following.

(a) The issuance of bonds on December 31, 2017.

(b) The first interest payment on June 30, 2018.

(c) The second interest payment on December 31, 2018

Answer 1

Solution:

Journal Entries -Paulson Company
Date	Particulars	Debit	Credit
31-Dec-17	Cash Dr	$88,367
	Discount on Bond payable Dr	$6,633
	To bonds payable		$95,000
	(Being bond issued at discount)
30-Jun-18	Interest Expense Dr	$3,679
	To Discount on Bond payable ($6873/8)		$829
	To Cash ($107000*10%*6/12)		$2,850
31-Dec-18	Interest Expense Dr	$3,679
	To Discount on Bond payable		$829
	To Cash		$2,850