Question

Presented below is a partial amortization schedule for Discount Pizza.

(1)	(2)	(3)	(4)	(5)
Period	Cash Paid for Interest	Interest Expense	Increase in Carrying Value	Carrying Value
Issue date				$58,467
1	$2,240	$2,339	$99	58,566
2	2,240	2,343	103	58,669

1. & 2. Record the bond issue and first interest payment assuming the face value of bonds payable is $64,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Interest expense increases each period because the carrying value of the debt issued at a discount increases over time.

true or false?

Answer 1

Solution :-

1. & 2. Record the bond issue and first interest payment assuming the face value of bonds payable is $64,000 :-

no	Particulars	Debit	Credit
1.	Cash A/C Dr.	$58,467
	Discount on bonds payable A/C Dr.	= $64,000 - $58,467 = $
	To bonds payable A/C (Being isurrance of bond)		$64,000
2.	Interest Expenses A/C Dr.	$2,339
	To discount on bonds payable A/C		$99
	To cash A/C (Being first interest payment recorded)		= $2,339 - 99 = $

Note:-Here I am little bit confused in 'b' bit . So I am not answered to 'b' bit. kindly requesting you not to give thumb down.

Thank you.