Question

On January? 31, 2016 Driftwood ?Logistics, Inc., issued five-year, 9?% bonds payable with a face value of $11,000,000.The bonds were issued at 93 and pay interest on January 31 and July 31. Driftwood Logistics, Inc., amortizes bond discount by the? straight-line method.

a. Record the issuance of the bond payable on January? 31, 2016.

b. Record the payment of semiannual interest and amortization of bond discount on July? 31,2016.

c. Record the interest accrual and discount amortization on December? 31, 2016. ?(Do not round intermediary calculations. Only round the final amount to the nearest whole? dollar.)

?

Answer 1

Journal entry :

No	Date	Accounts & explanation	debit	credit
1	January 31,2016	Cash (11000000*.93)	10230000
		Discount on bonds payable	770000
		Bonds payable		11000000
		(To record bonds issue)
2	July 31, 2016	Interest expense	572000
		Discount on bonds payable (770000/10)		77000
		Cash (11000000*9%*6/12)		495000
		(To record interest)
3	Dec 31, 2016	Interest expense	476667
		Discount on bonds payable (770000/60*5)		64167
		Interest payable (11000000*9%*5/12)		412500