Question

On January? 31,

20142014?,

DurkinDurkin

?Logistics, Inc., issued

tenten?-year,

77?%

bonds payable with a face value of

$ 5 comma 000 comma 000$5,000,000.

The bonds were issued at

9898

and pay interest on January 31 and July 31.

DurkinDurkin

?Logistics, Inc., amortizes bond discount by the?straight-line method.

Requirement

1.	Record? (a) issuance of the bonds on January? 31, (b) the semiannual interest payment and amortization of bond discount on July? 31, and? (c) the interest accrual and discount amortization on December 31.

a. Record the issuance of the bond payable on January 31.? (Record debits? first, then credits. Exclude explanations from any journal? entries.)

Answer 1

Date	Particulars	Debit	Credit
	(a).
Jan 31	Cash ($5,000,000 x 98%)	$4,900,000
	Discount on Bonds Payable	$100,000
	To Bonds Payable		$5,000,000
	(b).
July 31	Bond Interest Expense	$180,000
	To Discount on Bonds payable ($100,000 /20 interest payments)		$5000
	To Cash ($5,000,000 x 7% x 6/12)		$175,000
	(c).
Dec 31	Bond Interest Expense	$150,000
	To Discount on Bonds Payable ($5000 x5/6)		$4166.67
	To cash ($5,000,000 x 7% x 5 /12)		$145,833.34