Question

How would I journalize this transaction?

Zion purchased 6, $1,000, 5% bonds dated April 1 from Frontier Industries. The bonds pay interest once each year for five years. The bonds were priced to yield 6%.  Zion intends to hold the bonds until they mature.

Answer 1

Zion
Table values are based on :
n = 5
I = 6%
Cash flow	Table value	Amount	Present Value
Par value	0.7473	6000	4483.8	( 6 * 1000 )
Interest	4.2124	300	1263.72	( 6000 * 5 % )
Price			5747.52
Price of the bonds = $ 5748
Bond Amortisation schedule
Date	A.Cash paid	B.Intt. Exp.( carrying value * 6%)	C. Bond Premium (a - b)	D.Carrying value ( d-C)
Apr-01				5748
Year 1	300	345	-45	5793
Year 2	300	348	-48	5841
Year 3	300	350	-50	5891
Year 4	300	353	-53	5944
Year 5	300	356	-56	6000
Date	Account Title	Debit ( $)	Credit ($)
Apr-01	Cash	5748
	Discount on Bonds Payable	252
	Bonds Payable		6000