Question

Discount Amortization On the first day of the fiscal year, a company issues a $5,500,000, 10%,...

Discount Amortization

On the first day of the fiscal year, a company issues a $5,500,000, 10%, 6-year bond that pays semiannual interest of $275,000 ($5,500,000 × 10% × ½), receiving cash of $4,826,906.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Interest Expense
Discount on Bonds Payable
Cash

Can someone show me how to do this? I am lost!

Homework Answers

Answer #1

See, since the market rate of interest is not given in the question, we can't use effective interest rate method for amortization of Bond Discount.

Bond Discount is to be amortized using straight line method.

Bond Discount = $5,500,000 - $4,826,906 = $673,094

Tenure of the Bond = 6 years

No. of 6 month periods = 6 x 2 = 12 periods.

Discount amortization for every 6 months = $673,094 12 = $56,091.167 = $56,091

The journal entry would be as follows:

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On the first day of the fiscal year, a company issues a $5,100,000, 10%, 4-year bond...
On the first day of the fiscal year, a company issues a $5,100,000, 10%, 4-year bond that pays semiannual interest of $255,000 ($5,100,000 × 10% × ½), receiving cash of $4,634,211. Journalize the bond issuance. If an amount box does not require an entry, leave it blank. Cash Discount on Bonds Payable Bonds Payable On the first day of the fiscal year, a company issues a $7,100,000, 11%, 9-year bond that pays semiannual interest of $390,500 ($7,100,000 × 11% ×...
On the first day of the fiscal year, a company issues a $582,000, 10%, 10-year bond...
On the first day of the fiscal year, a company issues a $582,000, 10%, 10-year bond that pays semiannual interest of $29,100 ($582,000 x 10% x 1/2), receiving cash of $611,100. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method. If an amount box does not require an entry, leave it blank.   
On the first day of the fiscal year, a company issues a $771,000, 9%, 10-year bond...
On the first day of the fiscal year, a company issues a $771,000, 9%, 10-year bond that pays semiannual interest of $34,695 ($771,000 x 9% x 1/2), receiving cash of $809,600. Journalize the entry to record the first interest payment and amortization of discount/premium using the straight-line method. If an amount box does not require an entry, leave it blank or enter "0".
On the first day of the fiscal year, a company issues a $4,100,000, 7%, 9-year bond...
On the first day of the fiscal year, a company issues a $4,100,000, 7%, 9-year bond that pays semiannual interest of $143,500 ($4,100,000 × 7% × ½), receiving cash of $3,381,091. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $5,200,000, 6%, 9-year bond...
On the first day of the fiscal year, a company issues a $5,200,000, 6%, 9-year bond that pays semiannual interest of $156,000 ($5,200,000 × 6% × ½), receiving cash of $4,251,521. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $1,200,000, 6%, 8-year bond...
On the first day of the fiscal year, a company issues a $1,200,000, 6%, 8-year bond that pays semiannual interest of $36,000 ($1,200,000 × 6% × ½), receiving cash of $1,127,435. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $1,100,000, 9%, 10-year bond...
On the first day of the fiscal year, a company issues a $1,100,000, 9%, 10-year bond that pays semiannual interest of $49,500 ($1,100,000 × 9% × ½), receiving cash of $1,031,460. Journalize the bond issuance. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues an $423,000, 7%, five-year bond...
On the first day of the fiscal year, a company issues an $423,000, 7%, five-year bond that pays semiannual interest of $14,805 ($423,000 x 7% x 1/2), receiving cash of $397,600. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues an $704,000, 6%, 5-year bond...
On the first day of the fiscal year, a company issues an $704,000, 6%, 5-year bond that pays semiannual interest of $21,120 ($704,000 x 6% x 1/2), receiving cash of $661,800. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method. If an amount box does not require an entry, leave it blank.   
in the first day of the fiscal year, a company issues an $948,000, 6%, five-year bond...
in the first day of the fiscal year, a company issues an $948,000, 6%, five-year bond that pays semiannual interest of $28,440 ($948,000 x 6% x 1/2), receiving cash of $891,100. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method. If an amount box does not require an entry, leave it blank.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT